A few weeks back, word hit the Clinton Administration that fourth-quarter gross domestic product had been revised upward, to a muscular 4.8%, and that February employment jumped nearly 400,000, for the best monthly gain in five years. Good news? That depends on which part of the landscape you survey.
Far from sharing a uniform view of the U.S. economy, the President's diverse band of econo-pundits seems increasingly to be living in two separate worlds. Take the rocky terrain on the Isle of Reich, home to the liberal cadre of advisers led by Labor Secretary Robert B. Reich. The group counts among its sympathizers Council of Economic Advisers Chairwoman Laura D'Andrea Tyson, Health & Human Services Secretary Donna E. Shalala, and First Lady Hillary Rodham Clinton. This group views the economy as mired in a slump, with job-creation sputtering. The answer: plenty of government activism.
SEEING DOUBLE. Reich has complained publicly that jobs are simply not "bouncing back," with the U.S. 3 million short of the average post-war recovery at this stage. To the Reichians, that means the Administration ought to resist congressional conservatives' calls to cut the size of the President's $30 billion stimulus package--and maybe more if recovery heads south. Reich didn't alter his pessimistic view on Mar. 5, when unemployment dipped to 7.0%. "We are not seeing enormous progress," said the Labor Secretary. "It is not cause for celebration."
But listen closely, and you may hear the sound of optimism from the other camp, over in Bentsenville. Led by Treasury Secretary Lloyd M. Bentsen, the group includes Deputy Treasury Secretary Roger C. Altman, Budget Director Leon E. Panetta, and his deputy, Alice M. Rivlin. Pro-business, leery of an overly ambitious federal government, and committed to vigorous deficit-cutting, the Bentsenites' market-oriented approach also has the quiet backing of Robert E. Rubin, the influential White House official who heads Clinton's National Economic Council.
So how's the economy looking from Bentsenville? Pretty well, thanks. Although Reich tends to dismiss the big February jump in employment, Bentsen recently said that in the face of "great job growth, we'd have to take another look at the size of any stimulus plan." Meanwhile across town, Panetta was calling the stimulus package less a sparkplug for growth than "an insurance policy" for the hastening recovery. Similarly, Bentsen was crowing about the bond-market rally while asking the House for the second-largest tax hike ever: "There has already been a payoff...on debt-service costs...on home mortgages and credit cards...on financing new plant and equipment."
To Bentsen & Co., the Clinton economic program's emphasis on $345 billion in deficit reduction--a figure that Tyson, Reich, and some Clinton politicos thought may have gone a bit far--has turned out to be the best stimulus package ever devised. Bentsen says that the plan's positive reception by financial markets has driven long-term interest rates to historic lows--the equivalent of a $70 billion jolt to the economy.
DEBATE TEAM. It would be easy to overstate the differences between the two groups. Even the most market-oriented of Clinton's advisers, such as Rubin, fret that what looks like a solid recovery could die. And, in the Administration's collegial, think-tank environment, differing opinions resemble less a family feud than an Oxford Union debate.
But differences between the two groups may come into sharp focus in May, when Hillary Rodham Clinton is due to unveil a sweeping health-care-reform plan. The First Lady, HHS Secretary Shalala, and Reich insist the public is ready for radical reform--and is willing to pay higher taxes and accept fewer patient privileges to get it. The package will be hard enough to sell to Congress. If disputes with the Bentsen camp break out, it may be well nigh impossible.
In the current environment, none of the fiscal conservatives is openly saying that the First Lady's plans are too ambitious. Nor are they questioning whether the health plan's expected reliance on business taxes could retard the jobs and investment the President wants to create. That may change, though, if inflation jitters, fed by government spending, interfere in the bond-market rally.
So where is President Clinton in this genteel debate? Bouncing between the two factions, cheerfully picking a spending cut here, hiking funding there. In fact, the interplay of opinion so far seems to suit Clinton. The First Wonk is never happier than when moderating a good economic-policy discussion.