Bond market players, in attuning their thinking to the impact of a Clinton presidency, have assumed there will be a package of economic stimulus. They fear the package will add to the federal deficit and perhaps induce inflationary pressures.

One result has been a rise in intermediate and long-term interest rates, and a sharp widening in the yield spreads between three-month and 10-year maturities and between three-month and 30-year maturities.

This is reminiscent of the experience of January through March, when the President and then the Democrats in Congress produced competing programs to stimulate the economy. The risk is that talk of fiscal stimulus in the absence of deficit reduction raises the specter of increased deficits and inflation.

Attitude Is Challenged

In our view, the gloom is overdone.

It is true that Gov. Clinton has campaigned on a platform that includes fiscal stimulus. But he has also acknowledged the problem of the deficit (on which Ross Perot's campaign has focused attention).

Moreover, recent market behavior has probably served to remind the governor, if it was necessary, that market fears have the potential of negating the benefits of stimulus even before specific proposals are introduced.

Stimulating the economy and reducing the deficit simultaneously are incompatible. The probable program would combine stimulus in the first two years of a Clinton administration with deficit reduction thereafter.

Furthermore, the deficit reduction would have to be specific, identifying taxes to be increased and spending to be curbed, when and by how much. The market would not accept anything more vague.

Projecting the Results

The outcome of a balanced program would probably be favorable: A reinvigorated economy and renewed confidence.

With economic resources available and underutilized, renewed growth would not necessarily induce higher inflation. Quite the contrary, inflationary pressures frequently continue to abate in the early stages of economic acceleration. And with economic activity weak worldwide, there is no inflation to import.

If the deficit-cutting program slated for the out years is sufficient and credible, the fixed-income markets would take comfort, and intermediate and long-term rates could actually decline. But, of course, a great deal depends on what happens in the election and in the next administration.

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