Clinton Plan Plays to California’s Strengths : State likely to benefit in the long term, despite defense cuts

On balance, the Clinton Administration’s economic agenda and reordering of national priorities play to the strengths of California and should help the state. But while the President’s stimulus and infrastructure “investment” programs are likely to assist the state economy in its struggle to get out of the recession, hefty new defense cuts will complicate a California recovery.

Taking the big picture first, Clinton’s plan is likely to benefit California. But the exact impact of the Administration’s package will be unclear until details of the final package emerge in the coming months. The state legislative analyst’s office, UCLA California Business Forecasting Project and others are beginning to crunch the Clinton numbers to assess the specific costs and benefits to California. But one thing everybody already knows: The recession is just one of the many economic problems confronting the state. Downsizing in the defense, construction and real estate industries contributes to continuing high unemployment. That, together with state budget woes, keeps the California economy in the tank. The legislative analyst’s office is forecasting the loss of 120,000 jobs in the private sector in 1993.

Clinton’s programs would certainly put money into the state. Treasury Secretary Lloyd Bentsen said the short-term stimulus program would generate about 50,000 new jobs through highway construction, summer youth employment programs and other public works projects in California.

California also could receive a fair portion of the $160 billion over four years in new investments or spending. Of that amount, $48 billion would go into infrastructure projects. The rest of the money is slated for other programs. For example, federal defense-related research funds would be redirected to public/private technology and research projects, such as electric cars, high-speed rail, fiber-optic “highways” and other cutting-edge technology. The shift in policy plays right into California’s No. 1 future industry: high technology. Under the Clinton plan, California would get $3 billion to ensure that the state maintains its lead in energy technology. His proposed youth apprentice programs would be helpful in assimilating California’s many hard-working immigrants into a work force for tomorrow.

Such programs would help cushion accelerated defense cuts, which will be decidedly painful for California. And while more defense job losses will accompany the retrenchment, the Administration’s idea is to work quickly through the job losses by retraining workers and by creating incentives for the private sector to create jobs. Under Clinton’s plan, California would get $4.6 billion over four years to assist thousands of workers who have lost defense-related jobs. And because of proposed federal legislation, within the next year the state could receive $2.4 billion to extend unemployment benefits.

California could also take a disproportionate hit when it comes to the higher taxes on the wealthiest 1.2% of taxpayers. Californians account for 12% of the U.S. population but, according to IRS records, in 1990 the state was home to 16% of the individuals who filed tax returns reporting more than $200,000 in adjusted gross income. Still, the prospect of a California economy with renewed vigor is worth the short-term sacrifice.

Clinton promises no miracles for California. Indeed, the President has urged the state to work through its own problems. But new federal initiatives would help the state make its way through these difficult times.