Quake May Shake Loose Federal Economic Aid : Recovery: Disaster gives Clinton chance to bypass political objections to funds for Southland. Some aides fear the help will come too late.

For the Clinton Administration, the Los Angeles earthquake has provided a politically salable reason for doing what it has sought to do for most of its first year in power: pump billions of dollars into Southern California’s ailing economy.

In the wake of the damage, however, at least some Administration officials say they now fear that the help will come too late.

For most of 1993, as the national economy pulled into a fairly solid recovery, California--and particularly Southern California--was the lone holdout. That solitary status is even more true now that Northern California is beginning to show signs of economic growth.

Administration officials have held many meetings over how to respond to the economic distress. While they have offered help in the form of small-scale federal projects, defense-conversion grants and other efforts, requests from California officials for more aid have run up against an unyielding political reality: persistent, large federal budget deficits and strong resentment elsewhere in the country of California’s wealth and power.

“What are we supposed to tell the other 49 states?” one senior Clinton aide demanded when the subject of large-scale aid to California came up in an interview only a few weeks before the quake.

But now, the political dynamics have changed.

“The nation is beginning to really now empathize with California, where that was not the case before because of the long run of prosperity there,” said White House Chief of Staff Thomas (Mack) McLarty.

Two years ago, after the Los Angeles riots, neither the George Bush Administration nor Congress showed much desire to spend large amounts of money for rebuilding--in part because of resentment of California and in part because of the overall lack of support for spending on urban problems.

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Traditionally, Congress has been far more willing to appropriate funds for highways than for community development in poor neighborhoods. Americans have also generally supported disaster relief costs. Administration officials are counting on that empathy to help them win approval later this year of what is expected to be a multibillion-dollar supplemental budget request to cover earthquake aid.

But despite the changed climate, the aid request could still encounter difficulty in Congress--as the bill to provide money for Midwest flood relief did for a brief time last year.

As Administration officials begin planning for the aid request, they say they must balance the need to prepare a package that is broad enough to truly help the region against the necessity of avoiding proposals that might provide ammunition to members of Congress who seek to derail the package.

In their public statements, the officials have carefully tried to steer away from describing the aid as an economic stimulus, stressing that what California will be offered are resources for rebuilding.

“I don’t think you can really talk about repairing highways as being a stimulus,” said John Emerson, the White House aide overseeing relief efforts. “You’re really just talking about putting things back the way they were.”

Despite those disclaimers, however, the rebuilding effort clearly will have a stimulative effect on the economy. Last year, Clinton unsuccessfully proposed spending just over $12 billion nationwide in an effort to speed the national recovery. Now, he is likely to propose spending a significant fraction of that amount in just one region of the nation.

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“What you’re talking about is basically a $2-billion economic stimulus package for Los Angeles,” said one White House official who has been working on disaster relief plans. “You’re going to generate a lot of jobs.”

Spending on projects such as rebuilding freeways could generate tens of thousands of construction-related jobs, economists predict.

That effort is of obvious political importance for Clinton--a point underscored when Clinton named Emerson, who ran his California campaign in 1992, as the White House coordinator for the earthquake relief effort.

California and its 54 electoral votes are critical for Clinton’s hopes for reelection in 1996, and Clinton aides have long believed that a key to winning California once again is to show the state’s voters that the President has done his best to help with the state’s economic woes.

That desire underlays Clinton’s decision to travel to California so quickly after Monday’s earthquake, his pledges of aid and his crowd-pleasing statements about the need to consider round-the clock, seven-day-a-week construction efforts to fix the region’s freeways as rapidly as possible, White House officials said.

New federal money, along with payments by private insurers, will clearly have a stimulating effect on the economy, said Housing and Urban Development Secretary Henry G. Cisneros.

“This money is coming in from the outside that would not have come to the area under other circumstances,” he said.

What remains less clear is whether the new spending will be enough to offset the quake’s depressing effects on the economy, let alone help the region pull out of its slump.

Speaking from his own experience representing parts of Northern California hit by the 1989 Loma Prieta earthquake, former U.S. representative and current Administration Budget Director Leon A. Panetta, says he doubts the overall effect will be positive.

“While you do get some immediate jobs, over the long term it just has a negative impact overall,” he said.

“People and businesses move out of the area because they are afraid of more earthquakes,” he said, and jobs are lost because of the huge disruptions quakes cause.

Times staff writer Elizabeth Shogren contributed to this story.