Economic Quick-Fixes Seen as Futile and Full of Risks : NEWS ANALYSIS : Politics: Both parties seek instant results. But experts say tax cuts may backfire, and they urge long-term cures.

The bitter wrangling between President Bush and Congress over how best to put the nation’s economy back on its feet is more an exercise in politics than economics, analysts and policy-makers agree.

The painful truth, according to experts, is that nothing Washington is likely to do will be massive enough or timely enough to jolt the economy out of its current daze.

Last week, even as Sen. Bill Bradley was introducing one of at least four tax-cut plans now under consideration by lawmakers, he conceded: “Let’s be realistic about what we’re doing. None of these proposals--mine included--will automatically jump-start our economy, end the recession and guarantee a long-term future of growth and prosperity.”

In fact, some sweeping tax-cut proposals designed to stimulate the economy might backfire by increasing the deficit and raising fears of inflation that could lead to increases in long-term interest rates, slowing borrowing by consumers and businesses.

“It may be a minor improvement right now, but you’re running the risk of the dollar going down and the markets getting spooked, which would leave the economy worse off several months from now,” says Robert Reich of Harvard University’s John F. Kennedy School of Government.

And mere symbolism--such as Bush’s $28 shopping spree at a J.C. Penney store in Maryland last week--may only build public frustration.

“Most people in Washington understand that there is not much they can do at the moment, but the political pressures are immense,” says Lyle Gramley, a former Federal Reserve governor who is now chief economist of the Mortgage Bankers Assn. in Washington.

Moreover, he adds: “You can’t dismiss the possibility that they are going to do something foolish.”

Gramley and others are urging the President and Congress to focus instead on solutions to the nation’s long-term economic woes. They hope to persuade policy-makers to consider measures that would encourage savings and investment, for example, or plow more government resources into education and improving the nation’s infrastructure.

But House Budget Committee Chairman Leon E. Panetta (D-Carmel Valley) conceded in an interview that the chances of that happening are “not very good, because everyone still is infatuated with the quick-fix approach to dealing with the economy.”

Gail Fosler, a veteran Republican Senate staffer who is now chief economist of the New York-based Conference Board business research organization, agrees. “Frankly, taking a longer-term perspective in looking at policy would make a lot of sense. But it happens to be antithetical to the political environment. Everyone is looking for some sort of formula to placate the (political) unrest.”

The traditional government response to a downturn is more spending--both on public works projects that would create new jobs and on social programs to ease the pain of unemployment. Congress and the President have done some of each, agreeing on $5.3-billion legislation extending unemployment benefits and a $7-billion highway bill.

But the record $350-billion deficit prevents them from going much further. To boost the deficit risks scaring Wall Street and sending long-term interest rates up just at the time that the Federal Reserve is trying to stimulate the economy by lowering borrowing costs. And if they stick to their budget agreement--offsetting any tax cuts with spending reductions--they will have added little if any new energy to the economy.

“We are hamstrung,” says Rep. Robert T. Matsui (D-Sacramento), a member of the House Ways and Means Committee. “Whatever we do is marginal.”

Yet the White House, increasingly worried about Bush’s political fortunes, began signaling in recent days that it may be willing to reverse course and push for a more stimulative tax-cut proposal in January. The Administration apparently is considering tax-cut plans that would increase the deficit and force a reopening of the existing budget agreement.

No matter what approach is taken, Washington’s track record in trying to mount an effective anti-recessionary effort is poor.

In each of the six previous recessions since World War II, the government’s timing has proven notoriously bad. Each time, lawmakers took steps to stimulate the economy, including tax cuts, public works projects and additional social spending. And each time, the effects of those expensive measures were blunted by the fact that they were enacted after economic recovery was well under way.

Both Democrats and Republicans agree that a package of well-targeted tax cuts could give the ailing economy at least a modest boost. But Panetta says that idea is “more a prayer than the reality of what happens in the Congress.”

Each side has its own list of favorite tax reductions, and is likely to demand that it be included in the final product. Republicans are putting more emphasis on creating business incentives, while Democrats are seeking to ease the burden on the middle class.

Nor can they agree on how their programs should be financed, with Democrats proposing offsetting cuts in defense and Republicans making the hotly disputed claim that their programs pay for themselves.

“The fear I have is that there is going to be this kind of headlong drive to do some kind of tax package as a symbol that the President and the Congress are trying to do something to revive the economy,” Panetta says.

He warned that would merely “open the door for a bidding process that is very tough to control, and there is a real danger that you can repeat 1981,” when President Ronald Reagan and the Congress agreed on a massive package that many economists blame as a major cause of today’s staggering deficit.