Views on Clinton's Economic `Council'

TWO old Washington economic "pros" have mixed views about President-elect Bill Clinton's plans for holding an economic summit in a few weeks and the creation of an Economic Security Council after he takes office.

Herbert Stein, who was chairman of President Nixon's Council of Economic Advisers, says a conference of business and economic leaders that is public and televised "will just add to the confusion." After taking over from Nixon, President Jerry Ford had such a gathering and it was "a total flop," he recalls.

Of more help to Governor Clinton, says Mr. Stein, would be a private meeting with "a small group of mature, objective people - if he can find them."

Contrariwise, Beryl Sprinkel, who was President Reagan's top economic adviser, says the summit "can't harm anything and might help." If the differing views of economic issues are presented in an open discussion, Clinton "might learn something."

Further, the meeting would give Clinton an opportunity to show his continued interest in strengthening the economy, even though he can't do much about it until after he takes office in January, Mr. Sprinkel adds.

As for the Economic Security Council, Stein describes it as "a dumb idea which probably won't hurt much. It is dumb to put the focus of economic policy on security." Security could imply the protection of United States industry and trade from foreign competition.

In recent decades, the White House has always had an economic group to help the president make economic decisions. Under presidents Bush and Reagan there was an Economic Policy Council and a Domestic Policy Council.

"A change of name won't make any difference," Stein says.

Reports from Washington, however, indicate that Clinton has been considering giving the head of a new Economic Security Council cabinet ranking, a status parallel to that of the head of the existing National Security Council.

Sprinkel finds that idea troubling, primarily because of its implications for the Secretary of the Treasury. Traditionally the Treasury Secretary has been the nation's top economic policy spokesman. It is he who attends top international gatherings, such as those of the International Monetary Fund, and speaks for the US. Under Reagan and Bush, the Treasury Secretary chaired meetings of the Economic Policy Council not chaired by the president himself.

"Are you going to clip the wings of the Secretary of the Treasury?" asks Sprinkel. "I can't believe that would work." He doubts that any highly qualified individual would take the job if the Secretary of the Treasury wasn't the top economic policy person under the president.

When Sprinkel was working for Reagan, the Economic Policy Council would hash over an issue thoroughly, hearing from all sides, and then take a vote on a recommendation to the president. Reagan then would meet with the Council, acting as chairman, and the same issue would be discussed, with all sides aired again. Reagan would ask questions and make the final decision.

Sprinkel says he's not clear on how a new Economic Security Council would improve on this process.

Now an economic consultant, Sprinkel figures the economy could be growing nicely in 1993. The nation's money supply, he notes, has been growing at a 4 percent annual rate in the last few months. This could be sufficient to finance perhaps 5 percent or more nominal growth in national output next year. Since inflation has been trimmed to 1 to 2 percent, real gross domestic product could grow about 4 percent. That's enough growth to bring down the unemployment rate.

"This is playing into Governor Clinton's hands," Sprinkel says. "It will look like magic."

Sprinkel welcomes Clinton's plans for an investment tax credit or a cut in capital gains taxes as a longer-term method of encouraging productive investment. But he warns against any efforts to engage in "fine-tuning" economic demand through short-term fiscal or monetary measures, such as an expanded public works program. "It just doesn't work," he says. "It has been tried over and over again." The economic stimulation occurs after a lag, usually when the economy no longer needs it.