NEWS ANALYSIS : State’s View of U.S. Assistance Vital for Clinton

As President Clinton arrives in California on Friday for his eighth presidential visit, he will be shadowed by a crucial and unresolved question: Nearly a year after it began, how are his efforts to rescue the California economy being perceived?

To the Administration and its allies, the goal is to offer a measure of short-term economic relief, but, more important, to lay the ground-work for California to adjust to an economy in which it will no longer have the comfortable cushion of huge defense budgets. To many of the state’s elected officials, business and civic leaders, the program will not measure up unless it does a lot more to end the recession--and the sooner, the better.

“The expectations issue is very significant,” said Tom Epstein, the White House special assistant in charge of California affairs. “In a state with a history of growth and success, peoples’ hopes for a quick turnaround are very high . . . . But the federal government is not going to solve California’s problems by itself.”

How Californians judge Clinton’s efforts to help the state will affect his quest for California’s 54-vote electoral bloc in 1996 and the fortunes of his political allies in the state in the 1994 midterm elections. And, since California has become a showcase for the Administration’s efforts to shape a new economy and to reverse urban decay, these perceptions could even color the broader public view of Clinton’s activist government.

Several times in this century, the federal government has shown that it has the power to lift state economies--by throwing open the federal Treasury. With infusions of billions, for instance, America’s space program gave huge boosts to the economies of Massachusetts, Florida and Texas.

These days, Clinton does not have money to spend on massive projects. But within the limits of the federal budget, Clinton has showered California with the benefits of many small- and medium-sized government programs.

Perhaps the most visible has been in the program to shift war industries to developing peacetime products, which will spend $19.5 billion over five years nationwide.

California is expected to get at least 20% of this money, as was demonstrated in October when state companies and schools were awarded about 22% of $140 million in projects to adapt military technologies to civilian uses. From this effort, the Administration hopes to see new industries centered on the manufacture of flat-panel electronic displays, electric automobiles and environmental technologies.

The Administration has lifted prohibitions on export of some high-technology manufactured goods, including computers and computer chips, that are expected to add about $37 billion in sales. About one-third of those goods are manufactured in California.

And Clinton got the federal government to pay more of the health, education and other expenses incurred because of recent immigrants, a step that will provide the state with $400 million.

California also will get a big piece of the action as the Administration begins carrying out its strategy to revive troubled cities in the months ahead. The Administration is expected to announce early next year the selection of “empowerment zones” that will receive special tax breaks, federal benefits and regulatory relief as a means of spurring business growth and community development.

Los Angeles is almost certain to be chosen as one of six urban zones, a designation worth about $100 million in special aid.

Clinton’s California campaign also has included efforts to make sure the state gets a regular supply of federal projects and to see to it that they are delivered with as little delay as possible. Stanford University won out last month over Cornell University in competition for a $36-million high-energy physics lab, and the federal government accelerated delivery of $1.3 billion in funding to extend the city subway into East Los Angeles.

One sign of the effort’s relative generosity is the grumbling about favoritism from powerful Democrats in rival states--beginning with New York Gov. Mario M. Cuomo and spreading to Sen. Robert C. Byrd (D-W.Va.) and members of Michigan’s congressional delegation.

Clinton’s efforts have won him support in California. Los Angeles Mayor Richard Riordan, for one, has praised Clinton’s efforts. California House Speaker Willie Brown and state Senate President Pro Tem David A. Roberti also have hailed the effort.

But other elected officials have pressed for much more. U.S. Sen. Dianne Feinstein, for whom Clinton will be raising money in Los Angeles this weekend, has complained that the federal government is not doing enough and needs to give California 50% of the defense conversion money.

Others want the federal government to expand loans sharply to small businesses, accelerate the delivery of federal aid or even speed up defense spending as a means of jolting life into the economy.

Jack Kyser, chief economist at the private Economic Development Corp. of Los Angeles County, credits the Administration with good intentions but said not enough has been done. “They’ve done a lot of things, but they’re little, small things,” he said. “Particularly in Southern California, we need something big.”

Clinton’s California effort is a mirror of his convictions about the role of government. The defense conversion program shows his belief in the need for more public investment to foster future industrial growth and his conviction that an activist government can work with business to develop new technologies.

There is wide skepticism--from outsiders and even many defense executives--about the ability of the conversion program to develop new industries. Indeed, some outside economists think the program’s most important contribution has been in its search for the broadest and most long-term measures--some of which may not really pay off until Clinton is retired and writing his memoirs.

Those economists specifically point to Clinton’s success in selling the North American Free Trade Agreement, which will disproportionately benefit high-export California; his work to broaden trade with Asian countries, and the lifting of restrictions on high-tech equipment, which has already won plaudits from Silicon Valley.

Any hope that Clinton had of making a real dent in the recession ended, some argue, when his plans for large-scale spending on public works were scaled back sharply, then killed by a Republican filibuster in the Senate last spring.

“The problem is money: There’s just not enough to have an impact,” said David Hensley, a specialist in the California economy with Salomon Bros. investment firm in New York.