AS Arkansas Governor Bill Clinton treks along the country's campaign trail, he promises great economic change to American voters. But economists say his broad-based spending proposals miss an essential component: adequate funding to carry them through.
The Democratic presidential candidate now avoids the politically lethal call for increased tax revenues to finance more government investments. The federal coffers are empty, and the only way to pay for new programs is to go deeper into debt.
Mr. Clinton's commitments - from universal health care to school loans for every applicant - would ring up huge expenditures. His proposal to redress "tax unfairness" would pay for a 10 percent cut in middle-class taxes with a higher rate on incomes over $200,000.
To Robert Shapiro, vice president of the Progressive Policy Institute, the economic policy arm of the Democratic Leadership Council that Clinton recently chaired, the tax plan is "revenue neutral."
David Hale, chief economist with Chicago-based Kemper Financial Services, trades ideas with the Clinton campaign and the Bush White House. He says that while Clinton asserts that the deficit won't go up with the proposed tax shift, the governor offers no extra revenues for what he is promising voters.
Like all candidates, Clinton uses the coveted peace dividend as a cornerstone for rebuilding the United States manufacturing sector. "For every dollar cut from military research and development, another dollar will go into civil, nonmilitary technologies," asserts Mr. Shapiro.
Clinton's call to cut defense spending by one-third within five years will cause widespread displacement of American workers, and much of the dividend will be reinvested in converting military plants into civilian production lines and reemploying workers, says Shapiro. What happens to the workers in the interim? Shapiro says the campaign is working on a strategy.
Clinton's economics "are very vague," Mr. Hale says. "He talked a more fiscally conservative game before the New Hampshire primary [but now] he sounds more like a populist. He's a flexible kind of opportunist who offers no clear message."
Labor economists warn that Clinton's plan to provide tuition loans to all qualified students will deepen the federal deficit. Shapiro says Uncle Sam's outlays will only be temporary and that a federal trust fund will be repaid over time by withholding money from the graduates' paychecks or by enlisting graduates in national service as a teachers, police officers, or child-care workers.
With Clinton's loan plan, the federal government would incur a $150 billion debt over the next 10 years, says a senior Senate staff member who has documented the poor repayment history for student loans.
"The fastest-growing component of the federal budget already is payment on the national debt; this plan will just pile on more," the staffer says. Even if employment prospects improve once students graduate, "an income-contingent repayment system won't work; poorer students have a high default rate. Linking student aid to national service forces a lot of indebted students to do jobs they'd rather not do. That doesn't do much for national service."
By calling for employer-provided job training and health care, Clinton also pushes the private sector to work toward social change, says Hale. But business economists say that approach puts the cart before the horse - that employers lack the capital to educate workers and retool factories.
Lawrence Hunter, chief economist of the US Chamber of Commerce, says he welcomes Clinton's permanent research-and-development tax credits for business and new-company development incentives.
But Mr. Hunter says that in opposing broad capital-gains tax cuts Clinton fails to see that entrepreneurs are those who have the needed capital to invest in job-creating new ventures. "Business, not federal spending, will spur long-term economic growth," Hunter says.
Clinton's concern for labor doesn't reflect the country's long-term economic future, now challenged by competing foreign imports, Hunter adds.
Clinton has demonstrated his interest in the short term. After General Motors announced plans to layoff 74,000 workers, the Arkansas governor blasted President Bush for failing to provide employment opportunities by fast-forwarding the new federal transportation bill.
Highway funds must be "front-loaded so that we spend the first two years of money in the first year ... and create 200,000 [construction and related] jobs," Clinton states in his economic treatise, "A Plan for America's Future."