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Clinton's Support for California

July 11, 1993

* In "With a Friend Like President Clinton, California Doesn't Need an Enemy" (Opinion, June 27), Joel Kotkin and David Friedman, echoing a grossly inaccurate analysis issued by Gov. Pete Wilson, suggested that California would lose income as a result of President Clinton's economic program. As a lifelong Californian, I would certainly be concerned if that were the case. Fortunately it is not.

I am surprised that Gov. Wilson, in an effort to deal with his own budgetary woes, is attempting to undermine the most significant deficit-reduction package in the nation's history. The reality is that administrations over the past 12 years have carried out budget and economic policies that have set up California and other states for the serious economic and budgetary problems they are now facing. The governor ought to acknowledge that history when he criticizes a budget that seeks to reverse those policies.

Some of the numbers in the governor's analysis and that of Kotkin and Friedman seem to have been pulled out of thin air. Kotkin and Friedman have clearly received faulty information about the President's strong program of tax incentives to encourage small business investment. They agree that they are critical to California, but they seem to think he no longer supports them. To the contrary, the President continues to support those incentives--including capital gains, expensing, and research and development. These incentives are a top priority for the Administration in the House-Senate conference.

In addition, the President's proposed real estate incentives, also retained in the House bill, combined with lower interest rates that have already been produced by the President's commitment to deficit reduction, will help to spur California's sagging real estate market.

Regarding increased taxes on the wealthy, which both the governor and Kotkin and Friedman seem to oppose, the fundamental challenge facing the nation's and California's economy is the large federal budget deficit. It is in the interest of every citizen--wealthy, middle-income, and poor--to reduce the deficit. Frankly, no one can get a free ride. The President's plan calls for spending cuts and savings affecting farmers, veterans, federal employees and retirees, Social Security recipients, doctors, and hospitals. Should not the wealthy also pay their fair share?

As for defense spending, neither the governor nor Kotkin and Friedman can determine the impact of defense savings on California over the next five years. Clearly, there will be a significant impact. But the reality is that the specific defense program beyond the first year will not even be decided upon until the Defense Department completes its current review of our defense needs and capabilities.

In any event, these analyses ignore the most important aspect of the President's program: It will get the California economy growing again. The Administration's commitment to deficit reduction has already helped to lower long-term interest rates by nearly a full percentage point, pumping billions of dollars into the economy of California and the rest of the nation--reducing monthly mortgage payments and enabling more Californians to buy homes, automobiles, and other major purchases.

The President's deficit-reduction plan and his entire economic program will lead to more jobs and higher incomes for the entire nation. Nowhere is that more important than in California.

LEON E. PANETTA, Director

Office of Management and Budget

Washington

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