Fiscal and Economic Policy: Making Ends Meet Won't Be Easy

TREASURY DEPARTMENT

aving ridden into his second term in large part on the strength of the national economy, Clinton was hardly likely to dump Secretary Rubin.

Rubin, the low-key former investment banker who was, early in the President's first term, head of the NEC, has won points for keeping the Administration focused on deficit reduction and for his adroit handling of various potential crises, from a falling dollar to the Mexican bailout. When House Republicans refused to raise the debt limit to pressure Clinton during last year's budget standoff, Rubin's deft maneuvering allowed the government to keep paying its bills anyway, and to keep the presssure on the House.

Rubin wants to stick around for the entitlement reforms he considers key to continued deficit reduction, and to prove the economic Cassandras wrong about an impending recession. He'll also focus on pet projects: finding new ways to channel capital to inner cities, rolling out his promised new inflation-indexed bonds and using the bully pulpit to exhort spendthrift Americans to save more.

NATIONAL ECONOMIC COUNCIL

With director Laura D'Andrea Tyson headed back to Berkeley, Calif., some analysts say the NEC is at a crossroads. The council is supposed to coordinate the Administration's economic policy making, and Tyson's critics faulted her for not doing enough to prevent end runs to the President by Cabinet members.

``The President has to decide, does he want the NEC to be restored to the role it had in its first two years under [Treasury Secretary and former NEC head] Rubin?'' a trade lobbyist said. ``That is not a question of structure, that's a question of personality and the perception of who is head of it.''

Candidates to replace Tyson include deputy national security adviser Berger and Tyson's two deputies: Gene B. Sperling and Daniel K. Tarullo. Still another name that's been bandied about for the top NEC slot: Princeton University economist Alan S. Blinder, former vice chairman of the Federal Reserve and a onetime colleague of Tyson's on Clinton's Council of Economic Advisers (CEA). Along with good managerial skills, Blinder would bring a track record as an economic popularizer--he once wrote a monthly column for Business Week. But he's not a political heavy-hitter, which some argue is a vital quality for anyone who wants the NEC to have a central role in policy making. If CEA chairman Joseph E. Stiglitz moves on, Blinder could well be a candidate for that job.

By all appearances, OMB is a happier place these days. That's because for the first time since the beginning of the Administration, Panetta is out of the picture. Though much admired, the former OMB director and White House chief of staff was first and foremost a political animal. And that, some at OMB thought, got in the way of a budget agreement.

Franklin D. Raines, who in September was confirmed as OMB's latest director, ``is re-energizing the place,'' an analyst who's familiar with the agency's operation said. Not that Raines's immediate predecessor, Alice M. Rivlin, wasn't highly regarded and capable. But she always had Panetta looking over her shoulder and negotiating for her. ``Leon is a brilliant budgeter, but he's a politician,'' the source said. Raines, a former vice chairman of the Federal National Mortgage Association and an OMB figure during the Carter Administration, has already called for early budget talks involving both ends of Pennsylvania Avenue.