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April 16, 1993
Mortgage rates are holding near their Easter lows, but still can't break through the early March rock bottom.
New data from March were skewed by bad weather, and probably overstate weakness in the economy. The best example was the Retail Sales figure, down a full percent in the month. Other signs of slowdown were Industrial Production unchanged, and Industrial Capacity Utilization down from 80.1% to 79.9%. The only good news was a 38,000-person drop in Initial Claims for unemployment insurance.
An early concern about the Clinton budget was that once the gates of spending had been opened, Congress would pour through an uncontrollable flood of money.
Surprise, surprise. Congress is in a responsible mood (helped along by a downright stingy electorate), and it's Bill the Changer who has the itchy checkbook.
Not even Senate Democrats take Clinton's $16 billion "jobs" proposal seriously. They are holding the party line, but few will risk a high public profile.
The "Pure pork!" accusation from the Republicans is overdone. If you belive in demand stimulus (basic Keynesian economics), you can goose demand as effectively by spraying fifty-dollar bills from helicopters as by rebuilding a bowling alley. Aggregate demand is aggregate demand.
There are a couple of real weaknesses in Dollar Bill's deal.
Thirty years ago, the Republican Senator from Illinois, Everett Dirksen (who could win a rubber-faced contest with Lyndon Johnson), said "A billion dollars here, and a billion there, and sooner or later you're talking real money."
Sorry, Ev. These days $16 billion dollars is smaller than the range of error in Federal accounting. It is also too small to have any noticeable economic effect (except to add three-quarters of a billion dolars to next year's interest tab).
Other than trivial size, the stimulus deal suffers from bad timing. Clintonomics tells the people that their tax bill is going up by $400 billion a year in three years, but in the meantime would everybody please have a party.
Economists can't square the contradiction, and the people don't associate more deficit spending with good times.
While Clinton fights for one bad bill, another part of the stimulus package is dying an impolite death: neither Congressional Democrats nor business leaders want anything to do with the proposed investment tax credit.
Bond traders are overjoyed that Clinton's spending mania appeals to fewer people every day. (Joy is fine; just don't stimulate 'em.)
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