President Tells Summit State Must Take Lead : Recession: He hints at help with cost of immigrants in remarks to 550 at extraordinary session on California.

As 550 politicians, business executives and lobbyists descended on the downtown Biltmore Hotel for Assembly Speaker Willie Brown’s economic summit Tuesday, President Bill Clinton and Gov. Pete Wilson called on California to solve its own problems.

Speaking by telephone to the summit, Clinton held out the possibility that he would help California cope with the high cost of immigration, and said many of 500,000 jobs he intends to create will be in California.

But Clinton pointedly said the state and its leaders face “challenges that will have to be met by Californians.”

“You have to take the lead in improving your education system,” Clinton told the gathering. “You will have to take the lead in making sure your manufacturing and production is at least competitive with other states.”

Brown convened the extraordinary two-day session in an effort to come up with solutions to California’s 3-year-old economic recession. Patterning the event after the President’s economic summit in December, Brown invited government officials, economists and business owners. A sizable contingent of lobbyists, campaign donors and others with business before the Legislature also attended.

About two dozen business executives, lawmakers and others from Orange County went to the summit. Among them were George Argyros of Arnel Development Co. in Costa Mesa, Newport Beach developer Kathryn Thompson, John Martin of Irvine-based Taco Bell Corp., and Assemblymen Tom Umberg (D-Garden Grove) and Mickey Conroy (R-Orange).

The session was not open to the public, but was available through cable systems in 6 million homes around the state.

Giving the opening address, Wilson said the state is “suffering from self-inflicted wounds.” He called on the Legislature to reform the state workers’ compensation system to help small businesses, pass laws to limit litigation and ease some environmental regulations.

Wilson also called for help from the federal government: To reimburse the state $1.45 billion for the cost of services to immigrants, to loosen regulations so that banks and savings and loans can pump more money into the construction industry, and to change the Endangered Species Act to make development easier when wildlife is threatened.

For most of the day, dozens of economists, academics, officials and business owners gave their views about the state of California’s economy, its problems and how to ease the recession. Speakers ranged from former baseball Commissioner Peter V. Ueberroth to California AFL-CIO leader Jack Henning.

There was no clear consensus, but at midday Brown pronounced himself pleased with the direction of the meeting.

“It’s going very well,” Brown said. “People are really doing their job. They’re listening and they’re interacting. . . . It’s like going to grad school.”

Brown’s goals for the event are somewhat murky. His aides say he hopes to get ideas for a package of bills to stimulate the economy later this year. He’s also contemplating putting together a panel of economic advisers to suggest steps he might take.

Republicans and some business owners remain skeptical. Republican lawmakers say that Brown could do much toward fixing the economy by supporting GOP proposals to overhaul the troubled workers’ compensation system, which is costly and provides lower benefits to workers than many states.

“What is really necessary for this conference to be a success is for it to translate into action,” Wilson said. “There should be no need for further study. We ought to move forward.”

During much of the day, economists dueled with one another over what they thought was right and wrong with the state. Most gave a rather bleak view. The state’s economy may show a modest upturn by the end of the year, they said, but Southern California will lag.

Arthur Laffer, a supply-side economist who was influential in the Reagan Administration, called for a flat tax as a way of fixing the economy. Robert Arnold of the Center for the Continuing Study of the California Economy in Palo Alto repeated his view that there are no structural problems in California. He said the state’s problem is due to changes in the national economy and defense cuts.

David Hensley, of UCLA Business Forecasting Project, was among the pessimists. He predicted that California will lose 30,000 more defense jobs and 25,000 government jobs before the recession ends.

“The events of the past few years have prompted a universal reassessment of California,” Hensley said. “This reassessment implies a downward revision in expectations about future growth.”

The war of the economists left many of those who listened confused, if not frustrated. As he left after the morning session, Wilson offered the often repeated definition of an economist as one who knows “103 ways to make love to a woman, but doesn’t know any women.”

At one point C. Michael Armstrong, chairman of Hughes Aircraft, noted that he was new to the state, but suggested that Brown, Wilson and liberal Assembly Ways and Means Committee Chairman John Vasconcellos (D-Santa Clara) resolve their differences.

“If the three of you would take the consensus of this meeting and go into a room and don’t come out until you have a consensus, we’d solve this problem,” Armstrong said.

Pointing out that there are no quick fixes, Brown quipped, “You are new to this state.”

Throughout the day, politics was never far behind the scenes. Treasurer Kathleen Brown, a potential Democratic candidate for governor next year, planned to spend both days at the event.

“If you can get this number of Californians committed to putting the California economy back on track, it deserves my attention,” Brown said, adding pointedly, “I wish that (Wilson) had the time to stay.”

When Speaker Brown first proposed the summit, Wilson offered to be a co-sponsor. But the San Francisco Democrat, the second-most powerful politician in California, made it clear that it was his forum and declined the governor’s offer. The governor’s aides now seem happy to let Brown take responsibility for the summit, and be held accountable if nothing comes of it.

Dan Schnur, Wilson’s communication director, said the meeting Tuesday was “very courageous and very encouraging.”

The summit ends today when speakers will be asked to propose solutions to the state’s economic problems.

U.S. Trade Representative Mickey Kantor, appearing at the gathering, took the opportunity to promote the President’s economic plan. But he didn’t answer several questions from reporters about the effects of defense industry cuts in California other than to acknowledge that “there will be short-term dislocations.”

Wilson, in turn, criticized the Clinton plan, saying the proposal to increase energy taxes will fall heaviest on the lower and middle classes. He also said Clinton’s defense cuts will result in “still more people thrown out of work.”

“As they attempt to provide a stimulus to the economic recovery,” Wilson said of the Clinton Administration plans, “we are going to see still greater pain inflicted by that deficit reduction effort.”