Clinton considered concessions to the GOP amid signs of compromise on taxes and Medicare.
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Second-Term Challenges Await PresidentBy Steven Pearlstein
Washington Post Staff Writer
Thursday, November 7, 1996; Page A23
How do you build a Bridge to the Future using recycled materials and cheap parts?
That's the challenge facing President Clinton as he tries to turn this year's electoral victory into next year's economic policy.
With the president's economic team due for a thorough housecleaning Commerce Secretary Mickey Kantor already is said to be leaving and there likely will be a new secretary of labor, a new director for the National Economic Council and a new chairman of the Council of Economic Advisers the policy planning process has been on hold for the past several months.
But in conversations over the past month, the president's crop of economic advisers predicted that Clintonomics II would look something like this:
A key budget issue is what to do with Medicare, the giant health insurance program for the elderly that is slated to run out of money in the year 2001. The administration is likely to propose some short-term fiscal fix, while referring the more difficult questions to a blue-ribbon commission.
As for a companion commission on a long-term fix for Social Security, the odds are only 50-50 that the White House will move ahead next year. That one could wait until 1998.
Despite the serious misgivings of administration economists, Clinton's campaign promise of a $10,000-a-year tax deduction for college tuitions has proved popular among voters and with members of Congress, and will be a centerpiece of the 1997 agenda. Look for some fine print, however, designed to prevent colleges from trying to expropriate the federal largess by raising their tuitions.
And later in the year, when the budget negotiations with Congress get down to the final round, look for the president to propose reducing the gap by closing a long list of corporate tax loopholes.
"The best of these programs are extremely expensive and have only modest effect," said one Clinton adviser. "Most simply fail."
Good ideas are still being accepted.
Separately, an administration panel soon will come up with tough new quality standards for health maintenance organizations and other managed-care plans. That should play well with health-care providers as well as consumers, both of whom resent some of the heavy-handed cost-saving tactics of the health plans.
Over the next year, the administration will try to gently nudge China to move more aggressively to a free-market economy in return for U.S. sponsorship of Chinese membership in the World Trade Organization, which Beijing is seeking. The negotiations focus on the myriad of regulations that effectively limit what foreign companies can sell and do in China.
As a short-term step, the president may seek private assurances from Beijing that government-controlled enterprises will increase purchases of U.S. capital goods as a way of narrowing the trade gap and undercutting political opposition to trade liberalization with China, particularly from organized labor.
Still very much up in the air is whether Clinton will try to get "fast-track" negotiating authority to expand the North American Free Trade Agreement by including Chile. Trade officials argue that a Chile deal is important to reaffirm the U.S. leadership position on free trade. But political aides warn that this is no time to kick sand in the face of anti-NAFTA forces in organized labor, which went all out for Clinton in the presidential campaign.
Look for a Clinton proposal to bring some order to the process and a flood of corporate political giving as all sides maneuver for advantage.
The common thread running through this list of initiatives is that they can be accommodated within the context of a balanced budget and win support from a Congress that has become wary of hard-edged ideology.
In addition to these items, several aides predicted the president would try to recapture a measure of idealism and moral authority for his administration with a renewed commitment to revitalize the inner cities and lift the prospects of a growing and increasingly desperate underclass.
Given the failure of past government efforts in this area, the president would be careful to classify this initiative under the heading of urgent experimentation. At the same time, he has been stung by criticism from former allies that he has lost his social conscience and wants to balance the record by keeping the issue before the public. Treasury Secretary Robert E. Rubin of New York City also is keen on the idea of an urban agenda.
"Remember, this is a president who thrives on big missions," said one aide. "And right about now he's anxious to find one."
© Copyright 1996 The Washington Post Company