President Clinton called Thursday night for a national debate on whether the American economy could grow faster, suggesting for the first time publicly that the Federal Reserve has been too stringent.
Clinton said he had hoped that New York financier Felix Rohatyn would lead that debate. He said that was the reason he wanted to nominate Rohatyn, an architect of New York City's financial rescue in the mid-1970s, as the Fed's vice chairman.Addressing a $1,000-a-plate political fund-raising dinner as Republicans dueled hundreds of miles away in New Hampshire, Clinton denounced the "outrageous political treatment" of Rohatyn, who withdrew his name from consideration Tuesday in the face of GOP opposition.
"One clear area where we ought to debate is whether the conventional wisdom of about how fast this economy can grow is right," Clinton said. "That ought to be debated."
Clinton said the economic debate should be conducted within a commitment to deficit reduction, balancing the budget and avoiding a retriggering of upward-spiraling inflation rates.
"Noboby but nobody knows for sure that this economy can't grow any faster in the information age than it did between 1970 and 1995," Clinton said. "It ought to be debated within a commitment not to let inflation get out of hand."
Clinton made the remarks after a lengthy private discussion with Rohatyn, said White House spokesman Mike McCurry. And at the dinner, Rohatyn stood to a round of applause when Clinton called out his name.
The president offered no specific criticism of Fed policy or Chairman Alan Greenspan, a Republican who Clinton is expected to nominate to a third four-year term in the near future.
But his remarks were the first time since assuming office three years ago that Clinton has even raised the question whether Greenspan and other Fed governors were too focused on keeping inflation to a minimum in juggling interest rates.
Economic growth figures for 1995 have been delayed because of the government shutdown in the fight between Clinton and a Republican Congress over balancing the federal budget.
But most experts estimate that it slowed to an annual rate of 1.5 percent to 1.6 percent last year, compared with 3.5 percent in 1994. Meanwhile, the inflation rate the past two years has hovered in the 21/2 percent range while unemployment has remained at between 5 percent and 6 percent.
If the economy grew just two-tenths of 1 percent faster, Clinton said, "all the arguments we are now having in Washington over balancing the budget would be gone like that . . . over, history, out."
He said putting Rohatyn on the Fed would have allowed "a debate within a controlled framework, with serious people with a lifetime of achievement, to see if we can't give Americans a raise who are working hard, to see if we can't minimize inequality as we move to this new economy.
"But the politics of Washington said, `No, we insist on the conventional wisdom, we insist on holding people down, we don't even think it's worth debating - over and out,' " Clinton said.
The president discussed Fed candidates with his advisers on Tuesday and is expected to take up the subject again when he returns to the White House on Friday, McCurry said.
Clinton said Americans "should be pleased with where this country is and where we're going" and said he hoped the political debate this election year will focus on the economy and national security, not on "the cheap, silly, divisive, distractive issues that will undermine" the nation.
The dinner was a makeup date for Clinton; it had been canceled twice before, once because of the assassination of Israeli Prime Minister Yitzhak Rabin and again because of the Blizzard of '96.
Industrial output slumps
Industrial production plunged 0.6 percent in January, the biggest drop since the nation was emerging from the last recession five years ago. While the decline was due in part to the blizzard that hit the East Coast, it was fresh evidence of weakness in the manufacturing economy. (See story on B11.) The Federal Reserve said Friday the decline in output by the nation's factories, utilities and mines was the steepest since an 0.8 percent fall in March 1991. It was the second drop in the last four months. Production edged up 0.2 percent in December. In another report, the Commerce Department said that construction spending rose 0.9 percent in December, wiping out an identical loss a month earlier and helping boost outlays by 4 percent for the year. But the annual increase was less than half the gain in 1994. Single-family outlays fell for a second straight month despite falling mortgage rates.