WASHINGTON -- President-elect Bill Clinton yesterday said bond-financed infrastructure projects at the state and local level can play a major role in helping advance his economic growth program.
During the first day of a two-day economic summit in Little Rock, Clinton said programs to build highways and even high-technology communications networks would improve U.S. productivity and long-term economic performance.
"I've seen it here, and I've seen it at other places," Clinton said. "No question if we increase our investment in infrastructure for tomorrow, then we'll do better.
"We need to do it not just in roads and bridges and water and sewer systems, but we need to do it in new rail systems, air transportation systems -- there are all kinds of things out there for us to do."
Although municipal market participants hope Clinton will make it easier for states and localities to issue bonds, the President-elect gave no hint yesterday whether the economic recovery plan he is expected to unveil in late January will propose rolling back any of the bond curbs enacted in 1986.
Clinton convened the summit to hear from business executives, academics, and private economists on ways to implement the programs he outlined during the campaign to revive growth. Vice President-elect Al Gore and Clinton's top advisers and appointees for the new administration were all present to hear from the audience and panelists.
During the campaign, Clinton called for spending $20 billion a year more on infrastructure programs, and the topic was given high visibility yesterday. Alicia Munnell, senior vice president and director of research for the Federal Reserve Bank of Boston, was fifth on the speaker list with a presentation that linked stepped-up infrastructure spending and better performance by U.S. firms.
Munnell, using charts like most of the opening speakers, said U.S. infrastructure spending has declined steadily in the last two decades from 3% of gross domestic product to around 1.5%. Spending more on highways and other programs can "make our economy stronger" and businesses more profitable, she said.
Munnell argued that public-financed infrastructure programs do not crowd out private investment. Instead, she argued, by making goods and services flow more efficiently, private spending is stimulated and the size of the overall economy is expanded. And, she added, there are lots of highway, airport and other projects with "big payoff" that have already been identified.
Many such programs, she said, are generally popular and win by a large margin when they are put to voters.
Clinton responded positively to Munnell's comments, agreeing that "public investment for infrastructure crowds in private investment."
But he did not repeat his pledge to step up annual federal outlays by $20 billion. Instead, he emphasized that states are often the issuers of bonds through tax increases, and he said it will be difficult to determine how to budget programs at the federal level.
Federal spending on infrastructure is often criticized by economists for adding to the budget deficit in the short run, while any benefits that flow to the private sector are more long-term and difficult to quantify. "This is something we need to think about and talk about," Clinton said. "This is a big deal for the kinds of decisions we'll have to make about the deficit."
Much of the commentary that opened the summit involved a gloomy overview of long-term problems ranging from rising healthcare costs to a slowdown in productivity and capital spending and failing U.S. educational performance. There were frequent references to how the United State is losing its edge over other industrial nations in competing in world markets.
There were also repeated references to the widening gap between wealthy and low-income families during the Republican era of the 1980s, which Clinton has pledged to reverse in part with tax law changes.
Clinton emphasized he will work on the long-term problems of the economy and will not be deterred by recent statistics showing a pickup in growth. "The encouraging numbers people read in the newspapers are actually masked by their own personal experience in paychecks and savings," he said.
"Many of the problems we will be discussing here did not develop overnight, and we cannot expect to solve them overnight," he added.
John White, author of presidential candidate Toss Perot's economic plan who ended up voting for Clinton, warned that the dip in the deficit that had been projected in the middle of the 1990s probably assumptions, deferred bank ballout funding, and other the technical changes account for grimmer outlook, he said.