The President's economic problems - 02 October 1998

For the first time in a month, maybe two months, the front page of the New York Times contained no story, indeed no mention, of President Clinton.

The effect was like that of having spent an over-long holiday among the more disreputable nightspots of Amsterdam or Las Vegas and suddenly one morning finding yourself at home, facing the realities of work and life.

I quote the example of the New York Times not because I live here or because it's the best newspaper in America and, I believe, the last remaining paper of record in the English-speaking world. I don't know for how many years, certainly throughout this century, in the top left-hand corner of the New York Times, there is, always has been, a little box containing the phrase "all the news that's fit to print".

I don't believe the original publisher, or whoever coined that phrase, could have dreamed of a day when that page, or any other page, would print clinical details about a president's sexual encounters. But, as with every other serious paper on earth, the temptation was yielded to with the unanswerable assertion, "It's news, isn't it? Fit or not!"

So, having taken at last a breath of healthy air, let's see what is the business of America that has for too long been kept on the backburner or ignored. These are the stories that dominated the first scandal-free front page.

Top, big, half-page headline and two accompanying stories about the defeat of Chancellor Kohl and a profile of his successor. Bottom half-page story was about the final rampage of the merciless Hurricane George which devastated the Lesser Antilles, Puerto Rico, then the Dominican Republic, then Haiti, Cuba, sideswiped the Florida Keys, picked up more speed again through the waters of the Gulf of Mexico and finally battered the coastal towns of Mississippi.

You know, late August, through September into early October is the hurricane season, the time when they start to brood deep in the Caribbean. And after the first one, Albert, say, has smashed in or petered out, from then on every evening we see the head of the National Hurricane Service in Miami showing us a map of the Caribbean and somewhere in it a photograph of a fuzzy circle, with a little hole in the middle.

A hurricane is a slow-moving doughnut but revolving with winds at a speed of not less than 76 miles an hour. Most of them, the top grade, are over 100 miles an hour. So, every evening, we're instructed in the direction the thing is moving. And, of course, the first anxious Americans are the inhabitants of the long pistol of land which is the Florida panhandle, pointing down into the ocean.

About half the time, the thing turns north and then the fretful people are along the coast of Georgia and the Carolinas, and if it misses the Carolinas and turns due north, look out New Jersey, New York, Long Island and New England.

So, for the people who inhabit about a quarter of the land mass of the United States, this has been the pressing reality of American life. A president has, among all the other troubles and themes that have gone neglected, to take sharp notice of the plight of Puerto Rico, which is an American protectorate. And, of course, of the damaged parts of Florida, Mississippi and Louisiana. He flew over them this week and made them eligible for federal disaster money. It will take several billions.

The third big piece on that front page was one that economists and financiers have been dreading for some time. Bad news from Brazil. And the lead sentence in the news report, by a report, mind, not a commentator, is "The Clinton administration and the International Monetary Fund are putting together a package of loans for Brazil likely to total more than $30 billion".

It's meant to limit the damage to Latin America's biggest economy, damage from the Asian crisis. The bail-out plan is a calculated risk. Rather than save Brazil, it could sink the country into deep recession. We all heard months ago that Russia's economy was sinking fast and the rescue operation still goes on against awful odds. But once Americans got over the shock of Russia in recession, they tended to say "Oh well! After all, Russia takes only 2% of our exports".

But about four months ago, when we first began to appreciate the possible consequences of the debacle in Japan and Korea, and fear for Hong Kong's currency, an odd man out, an old retired international banker said quietly, while nobody listened, "Watch out for Brazil! If they go under, the Asian tidal wave has hit this hemisphere".

Now this may all sound academic and boring to Europeans because so far Europe's economy, Britain's as much as anybody's, is still robust and swaggering. But Brazil dominates the economies of South and Central America where the United States sells 20% of its exports. If Brazil follows the downward path of Russia and Asia, then the first thing to happen here would be an alarming decline in America's exports.

West coast firms, by the way, are already laying off thousands of workers who made goods that the Asians used to buy. And 90% of the ripe wheat in the Pacific state of Washington is not going, as it usually does, to Japan, but into storage or rotting bins.

It goes on, here, "Brazil, alone, can pull down markets and plunge countries into recession. If Brazil goes down, then Europe or the United States would become the next battleground against an oncoming global recession".

The last item on that front page was about the death of one Tom Bradley. He was the first black mayor of one of America's great cities, and he lasted in office for over 20 years. He was most proud of having brought the Olympic Games to Los Angeles and most embarrassed by the infamous Los Angeles riots, which his political enemies could always point out happened "on his watch", as the saying goes.

"On his watch" is a saying dreaded by all presidents. And I mentioned the death of that old Los Angelino because there must be people in the White House, if not necessarily the principal tenant, who are praying more fervently than most Americans that the worst doesn't happen to Brazil. That the American economy remains, as the investment analysts keep protesting rather over much, fundamentally sound. A phrase used by President Hoover and all the top financiers and bankers right up to and beyond the Great Crash of 1929.

The point here is that the Stock Market keeps on plunging, recovering a little the next day, plunging again. And finally this week Mr Greenspan, the chairman of the Federal Reserve, lowered the prime interest rate a quarter of a point. Wall Street promptly said it wasn't enough, getting ready to blame the man for the next market plunge.

So, why did I bring up "on his watch"? One of the reasons that have spurred popular approval of President Clinton as a president – bitter Republicans say the "only" reason – is that whenever the economy is prospering, a president is said to be doing fine, as in American football. When a team loses a string of games, the cry goes up, "Fire the coach!" Similarly with presidents and the economy.

The president, any president, has not much to do with the state of the economy. In fact, one of the public problems of the presidency is that the American people always, from knowing no other system, have always attributed more power to the president than his office possesses.

Compared with a prime minister, he's almost a ceremonial figure. Consider the budget. Imagine being able to come before the legislature, as Mr Blair's Chancellor can do, and say, "This is the budget." But whenever you read, "Clinton wants to save social security for baby-boomers", "Clinton urges loan to Brazil" "Clinton for sending troops into..." wherever. These are suggestions only. What he would like to have happen. All foreign policy decisions, most, are up to the Senate. All money matters – who gets what for what – throughout the whole economy, all are decided by the House.

So, as Shakespeare asked, the concernancy? The concernancy is that just as the president gets praised for the money that people have in their pockets, so, inevitably, he gets blamed when it isn't there. When anybody loses his job and, surely, when the country goes into a recession.

Listen, please, to this. It's a passage from the late, great John Maynard Keynes's devastating little book on the Treaty of Versailles, where he sat, in 1919, as the British treasury official. Quote, "He was the only man who emerged from the ordeal of Paris with an enhanced reputation. This complex personality with his habitual air of a weary titan, his eyes starily fixed on the true and essential facts of the European situation imported into the councils of Paris, when he took part in them, precisely that atmosphere of reality, knowledge, magnanimity and disinterestedness which, if they had been found in other quarters also, would have given us the good peace".

And who was this admirable, weary titan? Herbert Hoover. Who did a Herculean job in relieving the hunger, the famine of central Europe after the First World War and subsequently was President of the United States when the 1929 crash came. He was hurled out of office in the next election.

And when I first arrived here, his name was mud. Almost literally. Along every river bank in this continent of rivers were thousands and thousands and thousands of shacks with tin roofs and cardboard windows where the millions of the homeless lived. They were known forever as Hoovervilles.

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