President-elect Clinton's Little Rock economic summit was a stroke of genius.
By pulling together businessmen hoping for subsidies and protection from competition, interest groups that live off the federal budget, and diehard Keynesians who want more federal spending, Clinton gave the taxpayers a good look at the array of self-serving arguments that are used to mount raids on their pocketbooks.As the New York Times reported, "not only was there not a supply-sider in the lot, there was not even one advocating the basic Republican precept of low taxes and small government."
And The Washington Post noted that virtually no one at the summit promoted Clinton's campaign promise of a tax cut for the middle class.
Into this assemblage Clinton tossed barbed questions and pointed comments.
He responded to Princeton economist Alan Blinder's pitch for federal job training programs by noting that employers don't complain about an absence of already qualified employees. Do the employers not know what they are talking about, Clinton asked, or has the professor designed a solution to a nonproblem? Blinder, who thought he was preaching to the choir, was taken aback.
Similarly, Clinton threw cold water all over Yale economist James Tobin's and MIT economist Robert Solow's recommendations that the government spend more to enlarge the deficit in order to provide fiscal stimulus.
"We're all talking about the stimulus package," Clinton said, "as if the whole future of the republic depended on it. The stimulus is peanuts compared to increasing bank loans."
Clinton then added, "I've just been sitting here all day thinking about this." And he wanted to know why we should run the deficit up when we can get an $86 billion injection of bank credit at no cost to the budget just by curtailing overzealous bank regulators.
Clinton would really have KO'd the big government Keynesians if he had followed up by asking why they thought deficits were so awful when the fiscal stimulus came in the form of tax cuts, but were happy for the deficit to increase by another 1 percent of GDP as long as the mechanism was higher government spending.
Once Clinton understood that reducing government intervention could boost the economy more at no deficit cost than the ballyhooed fiscal stimulus, he began backing away: "If you define stimulus as meaning am I going to deliberately increase the deficit in this budget year, the answer to that is I haven't made up my mind yet."
That's a big change from what he was saying during the presidential campaign.
If Clinton keeps his eyes and ears open, he will quickly figure out that the doom and gloom about the economy is nothing but special interests pleading for more money. He already has caught on to the insincerity of economists who now want to run up the budget deficit after having blamed every conceivable ill on the Reagan deficit.
Clinton's astuteness offers hope as long as his main goal is to be a successful president.
Eighteen million new jobs were created in the 1980s by reducing the cost of capital and by curtailing the regulatory explosion. The spending programs that the special interests want will only stimulate the growth of government.
By showing their true colors in Little Rock, the special interests have allowed Clinton to back from an economic stimulus.
If the summit left the public wiser, too, Clinton will have the support to resist the special interests that rule Washington.