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Very Slow, Very Steady


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VERY SLOW, VERY STEADY

On the campaign trail, Bill Clinton spent half his time promising to revive the U.S. economy by boosting savings and investment. He devoted the rest to vowing a sweeping change in the insular way that Washington does business.

With his first round of economic appointments, the President-elect is showing that he's deadly serious about that first promise. But Clinton has also revealed that he is comfortable playing the insider and that his notion of change may prove far less dramatic than his campaign rhetoric.

Fiscal moderates love the likely choices of Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) as Treasury Secretary and of House Budget Committee Chairman Leon E. Panetta (D-Calif.) as head of the Office of Management & Budget. "They are good appointments, but cautious," says former Congressional Budget Office Director Rudolph G. Penner, a veteran of the Nixon and Ford Administrations. Liberals will land some top Cabinet jobs. But the steadfastly middle-of-the-road econoteam only confirms their worst fears: "The left has been totally neutralized," says one gleeful New Democrat.

MORE COMFORTABLE. Even as he was settling on his top appointments, Clinton has been quietly nailing down his economic agenda. While aides are still uncertain about the strength of the recovery, they seem more confident that the U.S. has moved into a period of modest growth. That, they hope, will allow Clinton to focus on his farsighted agenda of public and private investment incentives coupled with long-term deficit reduction. The short-term stimulus could be little more than symbolic--a modest $25 billion tax-and-spending measure that will allow Clinton to say he did something about the slump.

It's no coincidence that long-range goals are also expected to dominate Clinton's economic summit, set for Dec. 14-15 in Little Rock. Invited business leaders, more comfortable with the health of the economy, are likely to tell the President-elect just what he wants to hear: Focus on long-term growth. One invitee, Sanford R. Robertson, a Republican investment banker and Clinton supporter from San Francisco, says: "It's looking less and less" as if the nation needs a quick boost. "The economy is getting itself into gear."

The task of turning Clinton's investment dreams into reality will fall to a team rich in Washington and Wall Street savvy, united by the common goal of boosting economic growth, savings, and investment. Frank Shafroth, top lobbyist for the National League of Cities, says Clinton's economic gurus "recognize that if the deficit isn't controlled, it will hurt capital formation and investment."

Anchored by Bentsen and Panetta, Clinton's team is a mix of investment bankers and Beltway insiders. Robert E. Rubin, co-chairman of Goldman, Sachs & Co., is likely to run the newly formed Economic Security Council. The ESC will try to assure that the Administration promotes U.S. competitiveness. Bentsen's deputy at Treasury will probably be merchant banker Roger C. Altman, the vice-chairman of the Blackstone Group.

Long on brainpower, ego, and political smarts, Clinton's economic all-stars could soon clash. Panetta, for instance, believes passionately that the best way to promote investment is to reduce the federal deficit's drain on national savings. But Bentsen always has paid more attention to boosting private saving and investment, and he is willing to use costly tax breaks to promote his goal. Meanwhile, Harvard University's Robert B. Reich--who will continue to provide Clinton economic advice--is a proponent of investment in education, training, and other human-capital programs.

Properly managed, such creative tension could reap big dividends. But it puts enormous pressure on Clinton to act as mediator and broker. According to Bruce Barry, a management professor at Vanderbilt University, Clinton favors a "garbage can" model: "Throw the right people together, and make the right decision at the right time."

By dint of his experience and Washington stature, Bentsen is destined to dominate the team. The courtly Texan is no reformer (page 28). And liberals view him as a Republican in Democrat's clothing. "Bentsen is associated with George Bush's theories," says Jeff Faux of the labor-backed Economic Policy Institute. "You cut taxes on the rich, and that stimulates growth."

Bentsen wouldn't quite put it that way, but he believes strongly that tax breaks for business promote job creation. He'll use his Hill expertise to push Clinton's investment-oriented tax plan through Congress quickly. "He knows whose arm to twist and how to twist it," says Scott E. Pardee, chairman of Yamaichi International (America) Inc.

NO BIG SPENDER. The Texas Democrat is a master at the intricacies of tax law and understands the impact of tax provisions on corporate decisions. While he is no deficit hawk, Bentsen has been an advocate of fiscal responsibility. The exception: his 1992 proposal to expand individual retirement accounts, which over the long run might have been a revenue-loser.

Bentsen also may make Treasury more of a player in trade matters. He's a strong backer of the North American Free Trade Agreement but is willing to threaten retaliation to force the Japanese to open their markets. His two big weaknesses: He's 71 years old, and some question his stamina. Also, he has little experience in international finance. Still, the patrician Bentsen should get along well with fellow finance ministers. After all, says one Bentsen-watcher, "he looks like a Treasury Secretary. He wears Treasury Secretary suits."

Whereas Bentsen is aloof, Panetta is down-to-earth. But underneath his back-slapping good nature is a tough politician. He has always been willing to say no--a vital trait for a budget director. "Panetta should be given a lot of credit for sticking his neck out," says Urban Institute economist Eugene Steuerle. And while budget directors tend to be strongly partisan, Panetta began his political career as a Republican staffer.

Clinton's Friends of Bill were well represented in the campaign, and Clinton seems to have reserved an important advisory role for school chum Reich. Trained as a lawyer, not an economist, Reich is unburdened by either academic baggage or social-science discipline. He once advocated industrial policy and managed trade, but he now thinks investing in human capital makes more sense. With no bureaucratic power base, Reich could be little more than a gadfly. Or he could prove an intellectual counterweight to more prosaic Wall Streeters and Capitol Hill insiders around Clinton.

The investment-banking world will be represented by at least two members of the economic team. Blackstone's Altman is expected to be the deputy at Treasury. As an Assistant Treasury Secretary in the Carter Administration, Altman played a pivotal role in the bailout of Chrysler Corp. Tough and abrasive, he has been known as a deficit hawk.

Rubin made his mark helping to build Goldman Sachs into what many regard as Wall Street's most powerful firm. A top Democratic fund-raiser, he has become more interested in policy. His views stray far from Wall Street orthodoxy. For instance, he says: "I don't think we can have a successful economy until we deal with the problem of the urban poor." But his biggest influence will be in more traditional arenas. He'll be a key liaison to the credit markets.

These picks may not set the hearts of Democratic activists a-flutter. But they reflect Clinton's laser-like focus on the need for long-term investment. Presidents Carter and Bush never did develop a coherent economic policy. By picking a group that shares a common concern for the long view, Clinton has managed to get a leg up on his White House predecessors, even if he's not exactly turning Washington inside out.

TABLE: TEAM PLAYERS? ECONOMIC ADVISERS VYING FOR CLINTON'S EAR

With Senate Finance Committee Chairman Lloyd Bentsen as Treasury Secretary, Clinton will have powerful help in getting his economic program through Congress. Now, all he must do is finish his plans. Here's who will help, and the agendas each may push:

LEON PANETTA

The current chairman of the House Budget Committee, Panetta has a passion--and a plan--for slashing the budget deficit

ROBERT REICH

The Harvard academic once was a strong believer in industrial policy. Now he wants to focus on public investment in education and infrastructure

ROBERT RUBIN

The co-chairman of Goldman Sachs could be a friendly liaison to the world's credit markets. Rubin believes in developing economic opportunities for America's poor

DATA: BWHoward Gleckman, with Douglas Harbrecht, in Washington, Russell Mitchell in San Francisco, and bureau reports


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