Key Bush Adviser Outlines Strategies on Deficit, Trade

WASHINGTON — A senior campaign adviser to President-elect George Bush has outlined a possible strategy for dealing with the nation’s economic and trade problems, including an early move to bring the budget deficit into line and increased international efforts to hold the dollar steady.

The ideas, developed by Richard G. Darman, who is expected to be named Bush’s budget director later this month, were outlined at a private session of the Council on Foreign Relations Tuesday night. Although Darman intended his speech to be off the record, participants in the meeting discussed it Wednesday.

Darman reportedly stressed repeatedly that his views did not necessarily reflect those of Bush or the top policy-makers he has named--James A. Baker III as secretary of state and Nicholas F. Brady as Treasury secretary. Darman himself is not on the Bush staff now, although he was a key adviser to the Bush campaign.

Plan Called Consistent

However, several of those attending the session--among them former top policy-makers of both Republican and Democratic administrations--said that the suggestions appeared to be consistent with the general approach that the Bush team has hinted at before.

Among the elements of Darman’s plan:

--The new Administration would begin intensive negotiations with Congress as soon as possible in a bid to work out by next June the major elements of a plan to reduce the budget deficit.

Although many of the specifics would not be hammered out until later, the accord would send a signal to the financial markets--and to other nations--that the United States is finally serious about bringing its budget deficit down. Worry about the deficit has been a major cause of recent turmoil in the markets.

--The United States would seek to persuade West Germany, Japan and other industrial nations to refine and strengthen their existing agreements to keep the dollar’s value stable and to coordinate economic policies.

The United States and its economic allies have maintained such agreements since April, 1986, but some outside analysts say that West Germany and Japan are reluctant to intensify their efforts until the United States takes its promised measures to reduce the budget deficit. The budget accord with Congress, under Darman’s scheme, would be expected to shore up the allies’ enthusiasm.

--The new Administration, in what Darman described as an “artful execution” of economic policy, would carefully choose its rhetoric to describe U.S. economic intentions, and it would maintain close consultations with the Europeans and Japanese.

--Washington would seek to hammer out a new and presumably less confrontational relationship with Japan designed to enlist Tokyo’s help in sharing some of the responsibilities--and burdens--of managing the world economy.

That means the United States could call on Japan to take a bigger role in managing the global debt problem. And Washington could seek to enlist the Japanese in cooperating to create a freer economic arrangement with countries of the Pacific Rim.

The suggestions Darman outlined appear to fit Bush’s own personal and philosophical bent on economics. Bush advisers consistently have said that they want to continue the general economic framework of the Reagan Administration but see a need to deal with the budget, the dollar and other urgent problems.

Darman declined to comment on the speech Wednesday. But several attending the closed-door session said that, while he offered no specific proposals, he also pinpointed several other areas for attention, including a need to increase Americans’ saving and investment and to increase productivity in the United States.

Several of those attending Tuesday night’s meeting said that the audience repeatedly challenged Darman on Bush’s proposal for a “flexible freeze” to reduce the budget deficit.

Source of Baker Initiatives

Under that plan, Bush would hold overall federal spending growth to the rate of inflation, even though Social Security would be allowed to continue growing at a faster rate and defense spending would rise with inflation. Bush claims that this would bring about a gradual reduction in the deficit and in interest rates.

Darman’s audience considered his message particularly important because, as deputy to Baker at the Treasury Department, he was the major force in developing most of Baker’s economic initiatives.

These included the September, 1985, joint international effort to drive down the value of the dollar, the new machinery proposed in 1986 for coordinating economic policies of the United States and its major economic allies and the strategy for the 1986 income tax overhaul. Darman has often used such “personal” speeches to unveil ideas for forthcoming policy proposals.