WASHINGTON - President-elect Clinton acknowledge last week that he is getting conflicting advice on how to speed up the economy and generate jobs, but he also gave some hints about what he intends to do when he takes over as chief executive on Jan. 20.
The upshot is that Clinton can be relied on to tread carefully, seeking to meet his campaign pledges to revitalize the economy while assuring financial markets that he will not be a wild-eyed spender who adds recklessly to the deficit.
Clinton said some economists are urging him to ignore the bond market's nervousness over the deficit and go for tax cuts and spending programs now, which might guarantee a quick payoff in growth but a rise in interest rates.
Another camp of economists is urging the President-elect to emphasize a more patient approach that focuses on taming the budget deficit and doing less to jump start the economy. Such an approach could help the economy over the longer term by keeping interest rates down.
Characteristically, Clinton seemed to opt for a middle course that he hopes will fulfill his promises to voters without losing the confidence of Wall Street. "I believe that what we have to do is to have a disciplined reduction in the debt that will send a clear signal to the markets at home and abroad that we're going to bring this deficit down, but that we do it more gradually," he said in his first press conference since the election.
Getting the economy in high gear can help bring down the deficit, Clinton said. Among other things, growth generates tax receipts for the Treasury.
Clinton confirmed what the bond market began suspecting last month before the election. He will ask Congress for a short-run stimulus program, and it will contain an investment tax credit for business. Economists agree a tax credit could be implemented quickly and spur outlays for capital and jobs.
Clinton also said he will seek to accelerate government spending on roads, water facilities, and other infrastructure, in keeping with his campaign pledge to boost federal spending alone by $20 billion a year.
Clearly, Clinton is proceeding cautiously in shaping economic policy. And he will probably hold off on any final decisions until he hears from the panel of business executives; labor leaders, and economists that he has invited to Little Rock.
It would also make sense for him to wait as long as possible to see how the economy itself is doing. A move for a big set of new spending programs, however well intentioned, could undermine market confidence in the new President if it seems that the economy is getting better on its own steam.
Increasingly, there is evidence that this is the case. Initial claims to state employment offices for jobless benefits fell again last week to the lowest level in two years. The job market still looks pretty sick, with only scattered increases in employment, but at least it is not getting worse.
In addition, the Commerce Department reported that retail sales jumped 0.9% in October. The figure was higher than expected and showed solid demand from consumers for cars and other durable goods for the second month in a row.
Moreover, many of the big structural problems ailing the economy show signs of gradually improving. Corporations and home owners, having taken advantage of low interest rates to refinance debt, find themselves under less strain and better positioned to spend. Banks are profitable and have more cash to lend, and there has been some pickup in the money supply.
The next President does not have to operate in total fear of higher interest rates. Rates remain low, and Federal Reserve officials are signaling some tolerance for faster growth because inflation remains low.
What Clinton seems to be saying is that he will go to Congress with some programs that add modestly to the budget deficit.
He will also probably not forget his campaign pledge to reduce the deficit, which means he will include some measures in the budget to curb federal outlays after 1993.
It is also a good bet his budget will bank on faster growth, which is the most painless way for the government to collect revenues. Some of that money will have to go toward reducing the debt instead of funding new programs.