Reich Emerges as Key Policy Player : White House: Labor secretary is the main force behind Clinton’s new economic agenda. But some within the Administration are wary.

Labor Secretary Robert B. Reich, widely viewed as the “house liberal” during the first two years of the Clinton Administration, has emerged as the key economic policy spokesman for a President struggling to redefine himself as a champion of working Americans.

Reich is the moving force behind President Clinton’s new focus on a middle-class agenda, and the labor secretary’s influence was clearly visible in the President’s recent State of the Union Address.

It is a strategy that represents a sharp reversal from the policies of Clinton’s first two years in office, when the President emphasized reduction of the federal budget deficit at the expense of tax relief for middle-class workers suffering from erosion in wages and living standards. Until this year, in fact, Clinton has pursued an agenda dominated by deficit-reduction in an effort to win credibility with the financial markets--a strategy that many liberal Democrats privately blame for the party’s landslide defeat last November.

Reich seems reborn by the Administration’s new direction, one that emphasizes proposals he has been pushing since 1993. He finds himself at Clinton’s side as the President takes the themes of his State of the Union Address on the road, speaking of the need for change. The change would include a role for government in helping middle Americans through programs for job training, education, tax relief to help increase job skills and a sharp increase in the minimum wage.

“The President has put so much stock on proposals designed to help workers and middle-income Americans that he seems to be opening the door for Reich and his agenda,” observed Gary Bass, a policy analyst at OMB Watch, a Washington-based research group.

“We focused on deficit-reduction for the first two years, and now the primary elements of the President’s agenda are investments in training and education. And those are issues that Reich has advocated for a long time,” one senior White House official said. “I think it’s clear that the areas that he is interested in are on the ascendancy in the Administration.”

Reich and his allies in the Administration believe that this approach is the only way Clinton can distinguish himself from the Republican agenda of tax cuts and calls for a return to the economics of the Ronald Reagan years.

“I think it is terribly important for us to offer a contrast with the Republican (‘contract with America’),” Reich said. “The question we will be asking is: ‘Who puts working people first?’ ”

“This is the logical next step for the Administration,” said Laura D’Andrea Tyson, who chairs the White House Council of Economic Advisers.

Reich’s emergence as an economic spokesman appears to fill a vacuum. New Treasury Secretary Robert E. Rubin, nominally the Administration’s chief spokesman on economic matters, has been preoccupied by the Mexican peso crisis since taking over this month. And Rubin’s successor at the helm of the Administration’s National Economic Council has not yet been named.

“Hey, the more liberal they are, the better for us,” said Ed Gillespie, a spokesman for House Majority Leader Dick Armey (R-Tex.). “I think it is ironic, but clearly Reich and the other liberals in the Administration have been emboldened since the November elections.”

Reich’s new visibility also appears to irritate conservatives on Clinton’s economic team, including Alice Rivlin, director of the White House Office of Management and Budget, and Rubin. Both would prefer to see the President stay the course on deficit-reduction, especially because Republicans will be demanding far bigger cuts than those proposed by Clinton.

To be sure, one of Reich’s most controversial proposals, raising the minimum wage from $4.25 to $5 an hour over the next two years, won unanimous support from the National Economic Council. But the President’s political aides opposed the increase because they feared that the proposal would antagonize the powerful small-business lobby and would be doomed in the Republican Congress.

Key members of the economic team remain wary of Reich’s tendency to publicly float ideas that have not been cleared by the President. “The problems with Reich are problems of procedure. He tends to go off on his own,” one White House official said.

Administration officials still talk about Reich’s “corporate welfare” speech in November, in which he called for cutting billions of dollars worth of tax subsidies for major corporations to help pay for middle-class tax relief and “public investments”--without first consulting the White House. Reich denied that he was reprimanded, but a White House official said: “You will note that before he gave his next speech, he asked for and was given clearance.”

Other critics said Reich often uses bold rhetoric without following it up with bold initiatives.

The new Labor Department budget will see only a “modest increase” in training and skills programs in President Clinton’s budget, which will be unveiled Feb. 6, Reich conceded. But the centerpiece of Reich’s new “human capital” agenda--$10,000 in tax deductions for post-secondary eduction and training for middle-class families--would cost the Treasury about $20 billion over five years.

Relatively affluent taxpayers, who are already planning to attend college or participate in job training programs, would be the most likely beneficiaries. And colleges could see the tax break as a subsidy that would allow them to raise tuition. Some critics have charged that the plan would do little to make college more accessible to lower-middle-class families.

“Reich’s rhetoric is good at highlighting the worsening problem of income inequalities in America, but the problem is that the program behind it has been weak,” said Barry Bosworth, an economist at the Brookings Institution in Washington. “Reich is a great spokesman, but in a sense he is playing the same spokesman role that the President fills and isn’t providing the substance to back it up. This Administration doesn’t need any more chiefs.”

Still, the new Clinton-Reich agenda pleases liberal Democrats in Congress, who believe that Clinton lost his way during his first two years in office by offering economic policies that appeased the bond market but did not excite the traditional Democratic base of lower-middle-class voters.

“I like this much better,” said House Minority Whip David E. Bonior (D-Mich.), a leader of the liberal wing of the congressional Democratic caucus. “And I think Reich is the right guy to be the spokesman. He’s talking a middle-class, populist line now, and, frankly, we need that.”