TIME: Almanac 1993/TIME Almanac 1993.iso/time/101292/10129927.000

Text File | 1993-04-08 | 13.7 KB | 359 lines

                                                                                COVER STORIES, Page 44

BUSH, CLINTON, PEROT

Head To Head



In a TIME exclusive, top advisers for Bush and Clinton square
off in a feisty exchange over whose plan is more likely to fix
the broken economy

By S.C. GWYNNE and STEPHEN KOEPP/WASHINGTON

    Roger Altman and Richard Darman


    Q. Would each of you tell us what you feel are the most
important points the voters should know? Mr. Altman, why don't
you begin?


    ROGER ALTMAN: Well, I think the most important thing for
the voters to know concerns the Bush economic record. It's the
worst in 50 years, in terms of real growth, job creation and
decline in real income. It's a tragic record of failure.


    RICHARD DARMAN: First of all, the Governor of Arkansas has
managed to make his state somewhere between 48th and 50th in
every key indicator. Second, it is a crucial moment in the
history of global economic development. The world is moving
toward the U.S., toward market-oriented systems. It would be a
highly regrettable irony for America to head toward a highly
interventionist, European-style system of the type Governor
Clinton would produce. Those have failed.

    Let me mention a few ways to look at the Bush record
positively. Inflation is way down. Interest rates are way down.
Housing affordability has increased. U.S. productivity still
leads the world.


    ALTMAN: Production workers in the private sector have
experienced real pay declining to the levels of 1965. Does the
Administration accept responsibility for this record of
declining living standards? Do you think Americans are better
off than they were four years ago?


    DARMAN: In some respects yes, in some respects not. Why
don't we talk now about how things are going to get better,
because we certainly are not claiming that everything is rosy.


    Q. Why don't you each give us the highlights of your
economic plans.


    DARMAN: The key for long-term growth is to get
productivity up. And to do so, you need to reform the
educational system so that we're sending into the labor force
people who are more highly skilled and more adaptive in a world
that requires greater math literacy, science literacy and
computer literacy.

    Second, one of the areas of slowest productivity growth in
our economy is the health sector. So reforming it in the way
that we propose -- reforming malpractice, increasing
competition, providing greater power in the marketplace for
individuals and small business -- will slow the rate of growth
of these costs so that the economy is not suffering a deadweight
loss to the health sector's excessive inflation.

    Also, reforming the legal system, where we favor
substantial limits on liability to cut down on all the things
that discourage innovation because of the fear of excessive
litigation.

    Keeping tax rates low, as opposed to raising them. We
believe that's a greater incentive for work and for investment.

    Increasing research and development, which we have done;
shifting the emphasis toward applied civilian R. and D.


    ALTMAN: The main difference between Bush and Clinton in
economics is that one man has failed and the other man should
be given a chance.

    As to how we think the economy will improve based on our
plan, the key to this is getting the investment share of the
economy to rise. Over the past 12 years, it has fallen
approximately by half.

    We're going to fix that through a series of incentives for
private investment, including a 10% investment tax credit, a
permanent R. and D. tax credit and other incentives. We're going
to do that through the Governor's Rebuild America plan, on which
we will spend an additional $20 billion a year on
infrastructure of the future.

    Secondly, we're going to upgrade the skills and training
of our work force, which is the most important national
economic resource we have. We think we have a far more
comprehensive program than President Bush does in that regard.

    Also, technology. Clinton will reinvest every dollar of
savings from military R. and D. into civilian R. and D.

    Lastly, I would hope that there would be an improvement in
consumer psychology in the early days of the new Administration
because of the advent of new leadership. There's precedent for
that. It happened when President Kennedy replaced President
Eisenhower.


    Q. Why don't either one of your programs move faster to
balance the budget, as Ross Perot and others have urged?


    ALTMAN: I give Perot credit for advancing the debate. It's
a real contribution.

    Our view is that the Perot plan really would be too much,
too soon -- that it would hurt the economy rather than help it.


    DARMAN: The Perot plan and other serious plans have
something in common with the Bush plan, which is that they
recognize the importance of dealing with mandatory spending,
which the Clinton plan does not. There are some differences. We
do not favor tax increases. Do you favor any of those?


    ALTMAN: None of those is in our plan.


    DARMAN: Do you like any of them?


    ALTMAN: Clinton has talked publicly about subjecting
Social Security income for affluent Americans to a higher rate
of tax.


    DARMAN: Would he accept the Perot proposal to do it for
everybody with income over $25,000?


    ALTMAN: I don't know. I think if anything, it would not be
that low. But the concept of that proposal is something
Clinton's already said he thinks makes sense.

    The notion that no tax increases of any kind are
acceptable is the biggest hole in Bush's approach. I know that
you have said the budget can be balanced without any tax
increases. I don't know anyone who agrees with that. You would,
for example, try to cut mandatory spending by $294 billion over
five years rather than raise one dime on Americans earning
$200,000 a year or more.


    DARMAN: I think the truth of the matter is to say you
don't care about the deficit, because that's basically what the
Clinton plan says.


    ALTMAN: Given the Administration's record, it's absolutely
a joke for you to sit here and say we don't care about
deficits. That's like Jeffrey Dahmer accusing the police force
of brutality.


    DARMAN: That's a line you should have saved for the
debates, the real debates. Could we press further on this?


    ALTMAN: Let me add one thought. There's no way that
Clinton will do as badly as you have done on the deficits. Among
other things, the financial markets don't give Democratic
Presidents the leeway that Republican Presidents have to run
these massive deficits. In fact, a Democratic President with
this deficit would probably be impeached.


    DARMAN: The deficit, as a percentage of the economy, is
close to 5%. It was 6.3% in the 1982-83 period. I'm not saying
that we should be happy with it, but I think that you're way
out-of-bounds in suggesting that it's an impeachable offense.

    This is one area where the people who are attracted to
Ross Perot should note that they are in much closer agreement
with the Bush Administration than with Governor Clinton's
proposals, and that is on spending control. Perot recognizes
that you have to do something about the mandatory program
structure. It is two-thirds of the entire budget.

    We would put a cap on the rate of growth to allow it to
grow for inflation and population. That would save money
because spending would otherwise grow even more rapidly. It
would save $294 billion every five years.


    ALTMAN: Our view is that the central part of an effort to
reduce the growth in entitlements is to reduce the explosive
rate of health-care cost inflation.


    DARMAN: I'm sorry, Roger. All the money you save, by your
own plan's assertion, you turn around and spend.


    ALTMAN: We think we're going to ultimately save a heck of
a lot more than that.

    Can I ask you a question? You've got a 1% across-the-board
tax-cut proposal that costs $125 billion. How do you propose to
pay for that? You're double-counting.


    DARMAN: The President has not made a formal 1% rate-cut
proposal. He has said that insofar as we can achieve budgetary
savings that would allow additional tax relief, some of that
should go to an across-the-board tax cut.

    What would worry me enormously about the Clinton plan is
that the middle class will be hit with a substantial tax
increase. By our calculation, if he wants to hold his tax
increase to a 36% top rate, he would have to bring that rate all
the way down below $36,600 in individual taxable income in order
to fulfill his promises.


    ALTMAN: I just don't agree with your numbers. The Clinton
plan essentially says that if your family has $200,000 or more
of adjusted gross income, you'll pay more tax. If you don't,
you won't pay more tax. The average family of four at median
income will experience a $600 tax cut.


    DARMAN: Your biggest savings proposal is called "prevent
tax avoidance by foreign corporations." You estimate $45
billion from that. Now, I'd like to know how it is possible.
Clinton's numbers would be laughed out of court. They're a sham.
They don't add up.


    ALTMAN: There have been reliable estimates that the
Japanese auto companies have reported losses in the U.S. market,
since they began to operate in this country, of $7 billion to
$11 billion. Anybody who has had any involvement with auto
companies knows that that cannot be. I think there's a huge
problem here in terms of underpayment.


    Q. What are your plans for reforming the health-care
system?


    DARMAN: The President's plan includes a number of
important features. For every poor person, they would be given
the equivalent of a voucher. We set it at about $1,850, which
is sufficient to buy a satisfactory basic health-insurance plan
in a market, something we favor. If for some reason they did not
do so on their own, as soon as they come in contact with a
hospital emergency room, they would be informed that they are
eligible for the coverage.

    For people above the poverty level, working but unable to
afford health insurance, we would provide them an additional tax
benefit to help defray the costs of health insurance. The other
important thing to do is to increase what's called pooling, so
that there's much more risk sharing. The costs for people in
very small firms are averaged out over a very much larger pool,
which brings the price of insurance down for them.


    ALTMAN: That's part of the Clinton plan too.


    DARMAN: On the how-do-you-pay-for-it side, we favor
administrative savings, but we estimate we would only get about
$10 billion. We also propose tough malpractice reform. Governor
Clinton has been consistently opposed to any sorts of caps on
liability. But if you have them, then the principal driving
force for excess utilization is weakened, because right now
doctors are overprescribing as a measure to protect against
liability.


    ALTMAN: What would your proposal do on the cost side?


    DARMAN: Competition. We say the combination of
competition, coordinated care and emphasis on prevention would
produce about $45 billion, so that's up to about $80 billion
saved there. Now, our tax credits and other tax benefits would
cost almost $100 billion over 5 years, so we're short except for
this. Under our system, we would insure virtually everybody in
the system, and as they come into emergency rooms they would
come in automatically insured.

    The government currently reimburses hospitals for people
who are uncovered by insurance, so you save that. Well, the
savings we estimate would be at least $45 billion. So that the
combination of those would be $135 billion or more, more than
enough to finance our plan.


    ALTMAN: What he's outlined is not likely to reduce the
explosive inflation of health-care costs, and that's the
ultimate long-term problem.

    What we're proposing is a system, the main features of
which involve a standard, mandated benefits package and a cap
on what providers can charge for it, to induce competition
among, particularly, the medical insurers. Today's incentives
create excessive procedures, but incentives under our approach
would be for efficient provision of care. Some insurance
companies won't make it, but the efficient ones will.


    DARMAN: Is Clinton for the payroll-tax increase to pay for
this? It was estimated to be a 7% to 9% tax. If he is for it,
how is that going to be good for small business? If he's not,
how does he finance his universal health-care coverage? Is it
magic?


    ALTMAN: Clinton is not proposing a payroll tax. The real
payroll tax that has gone on is what's happened to health-care
costs on the Bush watch. Health-care costs have risen to 13% of
gross domestic product, and to 8% of payroll.

    What Clinton wants to do is treat this system as broken.
The way we have to fix that is essentially through managed
competition. By lowering the rate of inflation in health care
from 9 1/2% today to 5 1/2%, we can save enough to pay for the
extension of coverage to the 36 million Americans who today
don't have health insurance.


    DARMAN: The numbers are absolutely absurd. I know no one
anywhere who says you can get savings like that without
draconian rationing.


    ALTMAN: We have rationing today, de facto rationing.


    Q. What kind of job retraining would your programs offer
for, say, an autoworker in Michigan who lost his job?


    ALTMAN: Governor Clinton has proposed a quite
comprehensive plan with six or eight elements to increase or
improve the nation's educational training system. I don't know
how we would precisely retrain your figurative worker from
Michigan. But obviously, it