White House Takes Bow for Growth Trends : Economy: The President’s program is praised for record stock market levels and low inflation. Critics say it’s the business cycle at work.

With good news rolling in on the economic front almost every day, it seems clear that the nation has finally and irretrievably pulled out of recession.

That the recovery is accelerating was underscored by Friday’s report that the nation’s gross domestic product grew at the fastest pace in six years during the final quarter of 1993. Estimates of future federal deficits are declining. The stock market is setting new records.

Perhaps most remarkably, the economy has recovered without reviving inflation and the Federal Reserve has felt surprisingly little pressure to raise interest rates.

Indeed, Clinton Administration officials can barely contain their glee as Washington’s statisticians churn out glowing new numbers. And in time-honored fashion, the White House immediately took credit Friday for virtually all of the positive trends.

“There is a clear linkage between the President’s economic program introduced last year and the economy’s improved performance,” declared Laura D’Andrea Tyson, who chairs the President’s Council of Economic Advisers.

Friday’s report of rapid economic growth came one day after the nonpartisan Congressional Budget Office issued a new forecast saying that the budget deficit crisis is effectively over. It predicted that the deficit would fall to $166 billion by 1996, nearly half of what had been forecast earlier.

CBO Director Robert D. Reischauer gave most of the credit to Clinton’s economic plan. One Democratic senator called the report the “best news I’ve heard since I’ve been in Congress.”

Of course, Republicans and other Clinton critics argue that Clinton’s policies have had very little to do with the dramatic turnaround in the economic and budgetary outlook. They say that Clinton has been lucky--not good.

“Clinton is taking credit for the business cycle,” said Martin S. Feldstein, a Harvard economist and former Ronald Reagan Administration official.

“The Clinton budget plan has had almost nothing to do with the recovery,” added Michael J. Boskin, a Stanford University economist and former chief economist in the George Bush Administration. “Clinton inherited an economy doing much better than many people realized and certainly better than what he let on during the campaign.”

But such political distinctions have never stopped any President--including Reagan and Bush--from taking credit for positive economic trends. “We did not inherit a strong, robust economy” from Bush, countered Tyson.

Still, it may be too soon for the Administration to pop the corks on the champagne. Analysts warned that the economy’s high growth rate of 5.9% in late 1993 will not be sustained this year. Even the White House’s own forecast, to be released next month, will show that growth will moderate to just under 3% for 1994. The unemployment rate is not likely to continue to decline at the relatively rapid pace of recent months, either.

In addition, the surge of good economic news will not necessarily translate into political capital that the White House can spend on its ambitious domestic agenda for 1994.

Voters, critics noted, may not agree that Clinton should immediately shift gears from deficit reduction to big new spending plans in such areas as health care, welfare and job training. In fact, Clinton’s fiscal policies may be severely tested this year.

Already, many moderates in Congress are pushing for passage this year of more and tougher deficit-reduction measures--efforts that the White House will actively oppose.

Fearful that further spending reductions would make it impossible to fund health care reform or welfare reform, the cornerstones of Clinton’s 1994 agenda, the Administration will fight hard to stop an expected congressional push for a balanced-budget constitutional amendment this spring. White House officials said that they hope the sharp reduction in the CBO’s deficit forecast will slow the momentum of the balanced-budget forces but there is no evidence yet to support that hope.

Another potential obstacle to the Administration’s ability to fund its agenda may come from a bipartisan entitlement commission headed by Sen. Bob Kerrey (D-Neb.) and Sen. John C. Danforth (R-Mo.). In May it is expected to call for tough reforms and spending reductions in fast-growing entitlement programs, such as Medicare and Medicaid. The commission’s proposals could lead to a serious conflict between Congress and the Administration over the budgetary impact of Clinton’s health plan.

At the same time, new polls show that as the economy is improving and Americans are feeling more secure about the future, the popularity of Clinton’s health care reform plan--by far his biggest social initiative--actually is declining. An NBC News/Wall Street Journal poll in mid-January found that of those surveyed 42% supported the Clinton health plan, while 39% were opposed to it. In a similar December poll, 47% of those surveyed were in favor of the Clinton plan and only 32% were against it.

Administration officials and Clinton supporters are fighting hard to counter conservative efforts to depict the health care plan and other Clinton initiatives as huge new drains on government resources. Instead, Administration officials noted that the President plans to pay for his new domestic initiatives with offsetting spending cuts elsewhere. Voters should not see his 1994 agenda as conflicting with his deficit-cutting plans of 1993, they stressed.

“We are not going to increase the deficit with our proposals for 1994,” said Tyson. “In fact, the only way to deal with the deficit in the future is to address fast-rising health care costs through comprehensive reform.”

But Boskin and other conservatives view the Clinton agenda quite differently. They argued that, while Clinton’s social initiatives would start as small pilot programs, they ultimately would grow to the point that Congress would be forced to raise taxes to pay for them.

“This is the mirror image of Reaganomics,” said Boskin. “In 1981, Reagan tried to cut taxes to put pressure on Congress to reduce spending. Now, in 1994, Clinton is trying to build new programs into the budget that ultimately Americans will get hooked on, will require new spending and will put pressure on Congress to raise taxes.”