By STEVEN GREENHOUSE
Eager to put his own stamp on economic policy, President-elect Bill Clinton promises to do what every President since Franklin D. Roosevelt has done: come up with a new program to create jobs.
After President Bush took a largely passive attitude toward creating jobs -- and paid a heavy price for the sluggish economy on Nov. 3 -- Mr. Clinton has made it clear that he plans to be more aggressive.
Hoping to do far better than the one million jobs created under Mr. Bush, just 16,000 in private business and industry, the President-elect has said he intends to use tax credits and increased public spending on roads, airports and high-speed trains. He also promises to provide more job training and cut taxes for the middle class. Judgments From the Past
History shows that such efforts can create jobs. But they can also lead to fraud and inefficiency, and they are sometimes put in place when they are no longer needed. The record from six decades of Federal programs to create jobs leads to several conclusions.
Public works programs are a powerful tool to create jobs while also improving the nation's transportation network and competitiveness. Better highways, railroads and airports make the transportation of goods and people faster and cheaper.
One problem, however, is it sometimes takes so long to establish these programs that by the time they are put into place, the economic slump they were intended to reverse has already ended. Still, according to one study, every $1 billion spent on public works produces 25,000 construction jobs and 15,000 spillover jobs for concrete producers, tractor manufacturers, restaurants and other businesses.
Cuts in personal income taxes do in fact give the economy a quick consumer-led boost that can create tens of thousands of jobs, but they are less effective than public works at making the economy more efficient because the money gained from tax cuts does not go toward job-producing projects, like highway building.
In addition, tax cuts spur the domestic economy less today than they did decades ago because consumers now spend a large percentage of their tax-cut windfalls on imported goods like Sony televisions.
Tax credits for business investment are perhaps the quickest way to give the economy a shove forward. They also encourage investments in new equipment that raise productivity. Some economists predict that if Mr. Clinton introduces a 10 percent investment-tax credit in 1993, it will create about 400,000 jobs next year at the cost of an estimated $3.5 billion in lost tax revenue.
Because of the huge Federal budget deficit, tax cuts and public works spending are less powerful engines than in decades past because by increasing the deficit these programs help drive up long-term interest rates. And that works against the desired effect by hurting housing construction and business investment.
This principle also held true in years past, but with the Federal deficit now at record levels, the negative effects are greater than before.
Still, even with the problems, it is generally agreed that the only sure way the Federal Government can create jobs quickly is to increase the Federal deficit, either by cutting taxes or increasing spending. If a President expands public works spending by $1 billion, while at the same time cutting $1 billion in spending from other programs, the total number of jobs may not increase. After all, some jobs are certain to be lost as a result of the cuts.
At present, the biggest Federal job program is highway construction. It began four decades ago and was expanded greatly by last year's transportation legislation. This year the program will spend $20 billion, creating 800,000 jobs across the nation.
In New Jersey, for instance, the program has put 20,000 people to work this year, completing Interstate highways, resurfacing highways, painting bridges and building new interchanges. Indeed, at just one job site in Northern New Jersey, in and around Wanaque, the highway financing has put 1,200 people to work, building one of the final stretches of Interstate 287, a six-lane, 20-mile leg with a cost of $700 million.
Speaking about the construction industry, Thomas M. Downs, New Jersey's Commissioner of Transportation, said, "I'm not saying that public-works investment is a silver bullet, but it is helping reduce unemployment in the sector with the highest unemployment."
Liberals tend to favor such government building programs because they generally help the poor and unemployed while also addressing pressing needs, like renovating subway lines. The programs also reduce income inequality and provide on-the-job training for the unskilled.
"These programs are a success in the sense that they add to the number of jobs and have a fairly good record of not being make-work, but of getting productive things done," said Robert M. Solow, a Nobel Prize-winning economist who teaches at the Massachusetts Institute of Technology. But many conservatives dislike the programs, saying they bloat budget deficits and bureaucracies. They argue that the best economic stimulus is tax cuts, which allow consumers and companies to spend more, thus providing a boost to the economy.
Despite the continuing debate over Federal job-creation programs, Mr. Clinton plans to embrace a variety of them. As he does, he is likely to draw on lessons learned since the 1930's. The New Deal Deficit Spending, Money in Pockets
President Roosevelt took office in 1933 in a time of searing despair, when one in four Americans was out of work. Desperate for a solution, he embraced the then-novel ideas of John Maynard Keynes, the British economist, and recommended increasing deficit spending to put money in people's pockets.
Soon the New Deal demonstrated for all time that government could fight a slump by putting millions of people to work. It also demonstrated that most people like living on welfare far less than holding jobs.
In 1933, Roosevelt created the Federal Emergency Relief Administration, which gave states money for relief payments and for creating jobs. Two years later, he set up the biggest New Deal program, the Works Progress Administration, later the Work Projects Administration, and within months it had employed three million Americans.
Although there were plenty of make-work projects in the New Deal's early days -- historians recall workers raking leaves from one side of the street to the other -- eventually the program improved. W.P.A. workers helped build and upgrade 2,500 hospitals, 5,900 schools, 13,000 playgrounds and 651,000 miles of roads, among other projects.
"With time, the kinds of work that was done and the efficiency with which it was done increased considerably," said Barbara Blumberg, a historian at Pace University.
Largely because of New Deal programs, the unemployment rate fell from 25 percent in 1933 to 14 percent four years later. But Roosevelt was worried about runaway deficits. So in 1937 he reduced spending on these programs, only to see the jobless rate jump back to 19 percent in 1938.
"Mr. Roosevelt was never fully committed to spending enough money to stimulate the economy sufficiently," said Eli Ginzberg, who began teaching economics at Columbia University during the Depression. "The nation didn't really recover fully until it mobilized for war."
The jobless rate was 14.5 percent in 1940, seven years after Roosevelt took office. Only after the war machine began running flat out did unemployment fall, to 4.7 percent in 1942 and 1.9 percent in 1943.
Still, the New Deal showed for the first time how effectively government programs could reduce unemployment. And with that lesson, future Presidents did not hesitate to try their own approaches. Kennedy's Tax Cuts Stirring Economy, Spurring Debate
John F. Kennedy defeated Richard M. Nixon partly because of the 1960 recession. In circumstances strikingly similar to those facing Mr. Clinton, he took office when the unemployment rate was near 7 percent.
He tried a new approach to get the economy moving: Boldly defying criticisms that he would unwisely push up the budget deficit, Kennedy was the first President to use investment-tax credits and major income-tax cuts. He showed that these tools could work.
Still, the tax credits for business investment have generated decades of debate. Some economists contend that the credits wrongly favored some types of investment, like equipment, over others, like factory buildings.
Kennedy's Council of Economic Advisers was loath to recommend deficit spending and urged him to adopt the tax credit for corporate investments. In 1962, Congress approved the White House's proposal to give a 7 percent tax credit on equipment purchases.
"The investment tax credit looked like a good way to get a lot of bang for the buck," recalled James Tobin, a Nobel Prize-winning economist at Yale University and a member of Kennedy's Council of Economic Advisers.
There certainly was a bang; corporate investment in durable equipment doubled from 1962 to 1964, and employment jumped by 2.5 million.
But the President wanted to do more, hoping to reduce the jobless rate from 5.5 percent to 4 percent. So in 1963 he called for cutting income taxes as well.
Congress did not pass those cuts until 1964, after Kennedy had been assassinated. They reduced the range of personal income tax rates to 16 percent to 77 percent, down from 22 percent to 91 percent. Economic growth rose by 5.6 percent in both 1964 and 1965, and the jobless rate fell to 4 percent in 1965, causing Administration officials to congratulate themselves once again.
The Kennedy tax cuts inspired President Ronald Reagan's economic advisers, who pointed out that after the tax cuts, the Government's revenue actually increased, thanks to faster economic growth. But most economists say the main reasons tax revenue rose were inflation and and the way it pushed people into higher tax brackets.
Looking back today, some economists say Kennedy's advisers may be receiving too much credit. They say the effects of the Federal Reserve's low interest rates were overlooked at that time.
And now the wisdom of investment-tax credits is being called into question. Prof. Dale Jorgenson, an economist at Harvard University, believes they improperly skew investment toward certain areas, like machinery, and borrow from the future by moving up to today investments that would more properly have been made tomorrow.
"The Kennedy investment-tax credits did a lot of good in the early 1960's and a lot of harm at the end of the 60's," he said. When the tax credits were suspended in 1966, corporate investment slipped badly. Carter's Programs Help for Jobless, But With Catches
When Jimmy Carter took office in 1977, he had two big economic worries: high unemployment lingering from the 1974-75 recession and severe unemployment among young blacks in cities and the rural South.
He attacked both these problems by vastly expanding the Comprehensive Employment and Training Act, CETA, a Federal jobs program that was established in 1973. He doubled its size to cover 725,000 people and directed its focus to the hiring and training of the hard-core unemployed.
His efforts showed that government could provide training and valuable work experience for these generally neglected Americans. The employment act also showed that public service programs usually do more than public works spending to provide jobs for these hard-core urban unemployed. Under CETA, many people were hired as City Hall secretaries or park maintenance workers for example.
Had the same sums been spent on gleaming public works projects like highways or high-speed trains, these people would probably not have been hired because they lacked the skills and membership in the unions that often controlled the hiring.
But the act underlined the difficulties of rapidly doubling the size of a government jobs program. It was marred by accusations of fraud, nepotism and inefficiency. For example, city halls hired receptionists who sat in rooms where the phone never rang.
"CETA was a flop," argues William A. Niskanen, chairman of the Cato Institute, a Washington research group, and a member of President Ronald Reagan's Council of Economic Advisers. "It created jobs in the government sector where the work was of no particular value."
Some economists cite CETA, as well as an accompanying public works program, as the foremost examples of jobs programs that came too late, after economic growth had picked up. They say the Carter programs helped produce the economic overheating and double-digit inflation of the late 1970's. But Carter Administration officials say the huge increases in the prices of oil from Arab nations in 1979 caused the high inflation, not CETA.
Although Mr. Carter's Secretary of Labor, Ray Marshall, admits CETA was unwieldy and occasionally inefficient, he praised the program for helping young blacks.
"Thanks to this program, black male employment increased for the first time in the 1970's," he said in an interview. Reagan's Tax Cuts Boom Is Sparked As Debt Deepens
President Reagan stormed into office with a mandate to cut taxes, saying this would unleash American enterprise and spur economic growth. In his first months as President, he muscled Congress into passing the largest tax cut in history, a measure that reduced taxes by $280 billion over three years and included a 20 percent cut in personal income taxes as well as a corporate income tax reduction.
Although the Federal Reserve's high interest rates pushed the nation into a deep recession soon after the tax cuts were enacted, the extra money the cuts put in people's pockets helped pave the way for an economic rebound once interest rates fell.
"The tax cuts played an important role in the long expansion that started in late 1982," argues Murray Weidenbaum, Mr. Reagan's first chairman of the Council of Economic Advisers. Which Perspective Is Right?
A decade later, it is hard to find a dispassionate analysis of the Reagan tax cuts. Indeed, economists and politicians are still locked in a sharp ideological debate. Conservatives argue that the cuts lifted the economy by encouraging companies to invest more and people to work harder. In their view, the cuts helped produce 17 million new jobs in Mr. Reagan's two terms.
But Democratic economists heartily disagree. They note that the Reagan tax cuts did not, as promised, generate enough growth and tax revenue to prevent the deficit from ballooning.
And they say the main reason revenue did not increase as much as taxes were cut, as had happened under President Kennedy, was that the Reagan tax cuts were so much deeper.
These Democratic economists also assert that the tax cuts merely stimulated the economy in the old Keynesian way: generating growth by increasing the Government's deficit.
The truth probably lies somewhere in between. The tax cuts did stimulate consumers to buy more and businesses to invest more. Still, investment increased less than had been predicted and remained weak, compared with both Japan and Germany.
As for the 17 million new jobs created in the Reagan years, Democratic economists argue that they were created mainly because so many baby boomers entered the labor force and so many wives found jobs to supplement their husbands' stagnating incomes.
Whatever the effect of the Reagan tax cuts in the early 80's, most economists agree they have undercut growth late in the last decade and in the early 1990's. By the late 80's the cuts, combined with stepped-up military spending, had created annual deficits of close to $200 billion, leading to high long-term interest rates that dampen business investment and home building.
"Yes, they helped move the economy up" in the early 80's, said Charles L. Schultze, chairman of President Carter's Council of Economic Advisers. "But they did that with far too much consumption and far too little investment needed to prepare America for the future."
With its focus on increasing investment, the program that President-elect Clinton has outlined is in many ways a reaction to the perceived shortcomings of the Reagan tax cuts.
By calling for investment-tax credits, investment in public works and carefully monitored job training at the same time, Mr. Clinton hopes to improve on the job creation experiences of all the Presidents since Roosevelt.
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