Clinton Aide Takes Helm on Economy : Transition: The President-elect leans on Harvard’s Robert Reich for advice and a budget package. His selection signals a middle course.

Out of a crowded and diverse group of economic advisers who have been quietly jockeying for influence with President-elect Bill Clinton, one man seems to have emerged with an early edge: Harvard professor Robert B. Reich, an unabashed proponent of pro-growth industrial policy.

Reich, a longtime Clinton friend who first met him when both were Rhodes scholars at Oxford University more than 20 years ago, has been put in charge of economic policy for the President-elect’s transition team.

In addition, Reich--along with Los Angeles lawyer Mickey Kantor--has been put in charge of organizing Clinton’s proposed economic summit with business leaders, which is expected to be held here in December.

In an interview Saturday, Reich said he also will be responsible for assembling the Clinton Administration’s first budget package, which will likely be released soon after the Arkansas governor takes the oath of office as the 42nd President.

“My job, as described to me by President-elect Clinton, is to help him get an economic package ready by Jan. 20, including a budget package, and to make sure that he considers every option in detail,” Reich said. He added that his job will include making sure that “the (Clinton) economic plan presented last June (during the campaign) is polished and updated and put into a blueprint for governance.”

Reich, 46, was one of Clinton’s closest confidants on economic issues during the campaign. And through the years he has played an important role in shaping the thinking of key Democratic Party leaders on the government’s role in industrial and economic policy.

“If you had to pick the most influential thinker on economic affairs in the Democratic Party over the past 10 years, it would have to be Bob Reich,” said Gene Sperling, who was Clinton’s economic policy director during the campaign and who is now Reich’s deputy on the transition team.

The decision to give Reich the first economic policy appointment of the transition comes amid reports of bickering among some of Clinton’s other economic advisers over the direction of policy in his Administration. The Clinton camp reportedly has been split between liberals and moderates who have been arguing over how to balance the need to generate faster economic growth against the conflicting need to reduce the federal government’s record budget deficit.

Reich’s appointment seems to signal a middle course. Part of his job, Reich and others on the transition team say, will be to act as an “honest broker” who will help Clinton sort through the recommendations flooding in from other economists and outside consultants.

“I am just helping him get the best advice he can from all of his advisers,” Reich insisted Saturday. “I am merely a coordinator.”

With a quip calling attention to his size--he stands only 4 feet, 11 inches--Reich added: “I am just a little staffer. Very little.”

Yet Reich does have strong views. And it seems clear his views often mirror Clinton’s thinking.

Reich said he believes Clinton will have to consider a short-term economic stimulus package if the economy remains stagnant when he takes office in January. But he said that such a stimulus package would have to be tied to a long-term deficit reduction plan.

On Thursday, Clinton discussed just such an approach at his first news conference since the election. The President-elect said that upon taking office he plans to seek an investment tax credit for business and “substantially” accelerated public works projects to stimulate job growth while also embarking on a “disciplined” four-year deficit reduction plan.

“The issue is very obvious,” Reich said. “Any President--whether Republican, Democratic or independent--faced with a stagnant economy in January, has to seriously consider a stimulus. But given the size of the budget deficit, it would have to be tied to a long-term plan to reduce the deficit by an equal amount once the economy is back on track.”

In a wide-ranging interview, Reich seemed to downplay the importance of Clinton’s proposed economic security council. Many observers have suggested that the council could become a powerful domestic version of the National Security Council, taking the lead in setting economic policy. And it has been widely speculated that Clinton had come up with the economic council idea with Reich in mind as someone who could run it.

But Reich--again stressing that he was only expressing his own opinions--said he believes the economic council should probably play a more modest role in economic matters than the NSC does in foreign affairs. He said the economic council should be more like the White House’s existing domestic policy council, which is a low-visibility office primarily in charge of coordinating policy options and mediating disputes among agencies.

Reich said he believes “you got to have someone (heading the economic council) who is an honest broker, mediating between OMB (the Office of Management and Budget), the Treasury Department and the CEA (the Council of Economic Advisers).”

Reich added that “President-elect Clinton may have a very different concept” of how to structure the council.

But Reich said he would be concerned that if the chief of the new economic council had equal power over economic policy with the Treasury secretary, that could create serious turf battles of the kind that developed between the State Department and National Security Council during the Richard Nixon Administration. At that time, Henry A. Kissinger, Nixon’s national security adviser, undercut the power of Secretary of State William Pierce Rogers.

Reich also indicated that he would not be interested in running an economic council that would primarily act as a mediator between agencies.

“I am not a person with no views,” he said. “My guess is that job is tailor-made for someone with different skills.”

His comments leave it unclear what, if any, position Reich might have in Clinton’s Administration. The financial markets already have shown signs of being jittery about Clinton’s economic agenda. In order to maintain credibility with Wall Street, the President-elect may turn to well-known figures from the investment community, rather than an academic figure such as Reich, to fill his key economic policy posts.

And if Reich’s view of the role of the economic council prevails, that would seem to suggest that the agencies that are currently powerful when it comes to economic policy--OMB, Treasury and the advisers council--would remain powerful in a Clinton Administration.

Reich has gained influence on economic affairs both in the Clinton camp and throughout the Democratic Party despite the fact he is not a professional economist. As a professor of political economy at the Kennedy School of Government at Harvard, Reich has gained prominence largely for his work in identifying and synthesizing broad global economic and political trends.

Perhaps his most important contribution has been to provide intellectual ammunition to political moderates such as Clinton who have sought to change the focus of the party’s economic agenda to make it more pro-growth.

In his most recent book, “The Work of Nations,” Reich argues that in an increasingly global economy there is little that a national government can do to directly curb the flow of investment and trade as it moves around the world. So, given that corporations cannot be stopped from moving their capital from one nation to another, governments should concentrate on developing the national assets that are not mobile: the country’s people and its infrastructure.

A better-educated work force, coupled with a more efficient transportation and communication network, will ultimately attract private capital and thus generate jobs, according to this view. Reich argues that government should focus its spending on such things as job training and public works programs--conventional infrastructure projects like highways as well as such non-traditional items as national computer networks.

“Where Reich really contributed the most to the party was in developing the idea that government investment in people is not just a fairness issue, it is a growth issue,” said Sperling.

Reich’s thinking clearly dominated the economic agenda Clinton proposed during the campaign. On the stump, the Arkansas governor constantly echoed Reich’s belief that the nation is suffering from an “investment deficit” at least as severe as the budget deficit.

During the Ronald Reagan and George Bush administrations, both men argue, the government did not spend enough on programs to improve the skill levels of workers, and it allowed the nation’s infrastructure to deteriorate at an alarming rate.

Reich notes that German workers enjoy higher average wages than do their American counterparts, despite the fact that a greater percentage of Americans receive college degrees. Germany invests more in training at all levels, broadly enhancing productivity.

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