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Clinton Predicts Interest Hikes Will Aid Growth

May 19, 1994|JACK NELSON | TIMES WASHINGTON BUREAU CHIEF

WASHINGTON — President Clinton, breaking with some members of his own party, Wednesday endorsed the Federal Reserve Board's latest boost in interest rates and predicted that several years of sustained economic growth will follow--especially if the European and Japanese economies bounce back.

In an Oval Office interview, Clinton said that he expects no further rate hikes but suggested that the four increases in interest rates that the central bank has ordered since February to head off inflation will prove helpful to his domestic policy agenda. Economic growth with low inflation is vital to any expansion of federal spending on social programs.

The President's position on higher interest rates reflects a clear political gamble. Some Democrats in Congress, including Sen. Paul S. Sarbanes (D-Md.), have warned that the higher rates will hurt home-building, cost jobs and generally slow the economy. And a group of 45 senators and House members sent the Federal Reserve a letter protesting the rate hikes.

"Just as the economy is coming back up for air, the Fed is pushing it back down again," Sarbanes said. "The Fed launched a preemptive strike against inflation, but it's actually a preemptive strike against growth."

But Clinton, although he insisted that he expects no adverse economic impact from the rate hikes, clearly has decided that he will be better off politically if any economic pain develops now instead of next year or the year after--when he will face reelection.

And, as part of his effort to chart a middle course for his party and regain the support of moderates who defected to the GOP during the Ronald Reagan and George Bush years, Clinton worked hard to present himself as a President who favors sound, careful fiscal policies--whether the issue is curbing the deficit or preventing inflation.

Declaring that he feels "pretty good about" what the Fed has done, Clinton said:

"After all, what we want for America is steady, sustained growth, where we get more jobs and we keep them for as long as possible. We don't want to put the American people on another roller coaster where they go way up and then they turn around and go way down. If we can keep steady, sustained growth, that's what we want. And I think that's where we are now."

The President initiated the session with the journalists Wednesday ostensibly to discuss his efforts in a series of recent speeches to lay out what he sees as the need for a two-pronged approach to such festering social problems as crime, racial polarization, violence against children and the disintegration of family and social structures in the nation's inner cities.

To deal with these problems, Clinton said, increased government action must be accompanied by an increased sense of personal and community responsibility. Passing the crime bill now pending in Congress will put more police on the streets and help in other ways, he said, but government cannot do the job alone.

"People have to be energized and they have to wipe away enough of their cynicism to be willing to take personal responsibility for themselves and to try to rebuild their communities," he said.

But the interview quickly moved beyond that theme to focus on the Administration's more immediate problems.

Asked at one point about critics' claims that he suffers from the character flaw of indecisiveness and that he has caved in and abandoned his positions on important issues, Clinton bristled.

Calling it a "bum rap," the President said that he found it "amazing people could say that with a straight face." Over and over again, on issues ranging from deficit reduction and health care reform to gun control and free trade, Clinton said, he has taken on more entrenched interests and fought them harder than any President in recent times. Winning approval of the North American Free Trade Agreement, for example, had required him to take on "a big part of my own political base"--including organized labor, he said.

And "this health care thing has incurred the wrath of a whole new range of enemies of all kinds," he added.

He acknowledged that his use of the bully pulpit has been undercut by months of controversy over allegations of womanizing and financial transactions of the Whitewater real estate development that are being investigated by a special counsel. He said that his answer is to go about his job and let the American people "make up their mind what they think about me and whether they believe me or those who are attacking me."

A President or any public official today, he said, "has very little protection against people who wish in an organized way to pillory or vilify the President. And so, the only protection is, it seems to me, to keep working and keep taking on the tough challenges and to demonstrate to the best of your ability who you really are to those people."

He said: "I don't think that it requires a great perception to conclude that a lot of the motivation for this is to deprive me of my voice."

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