Clinton's Economy - 4 December 1992

It's been 30 years since John F Kennedy was elected to the presidency and in his inaugural speech the following January he declared the torch has been passed to a new generation.

Well, since he was the second youngest president in history, we all applauded and said "quite right", but the leaders, both European and Asian, that Kennedy was going to have to deal with were in their 60s and 70s: Macmillan, de Gaulle, Mao Tse-tung, Adenauer and they would be in power when he'd gone after the short less than three years of his reign. And his successor Lyndon Johnson, though barely 10 years older than Kennedy, was a veteran politician who'd started in politics 30 years before with Roosevelt's New Deal and believed in its ideals and its methods, so really looking back on it now we can see that Kennedy was a forced blip on time's radar screen. He would today be 75 and all his contemporaries are long gone from government.

But if Mr Clinton were to echo the same phrase in his inaugural, he would be more surely speaking the truth. Nothing is more striking during this transition time than the youth of the new faces and the voices that speak for Clinton the economic advisors, the press spokesman, the men so far only men who appear on television and say what the new administration is to be about. After a few weeks of our getting to know these people who will form his camp of cronies or kitchen cabinet as we say, President Bush suddenly seems like a Chelsea pensioner. He's only 68, but then only four presidents out of 41 have been as old as Mr Bush was at his inauguration. The man who fooled us and scrambled the record was of course the immortal Ronald Reagan the oldest man ever to enter the White House, a year older than George Bush leaving it.

If there's one remark more than another that indicates the positive passing of an old order it's the reflection somebody made the other day that George Bush is probably – I would say certainly – the last veteran of the Second World War who will come to the presidency. The war to Clinton's generation means Vietnam and even at that he was only just old enough as we learned many times over during the campaign to be eligible for the draft. I've noticed for instance that no contemporary American politician ever talks about Korea as a United Nations war. When it's mentioned, it's by old codgers who pass on to the young the thought that Korea was an all-American war and probably not worth it. When the Korean ceasefire was instituted, William Jefferson Clinton was five years old, so the recognition that from the 20 January on we really are about to enter a new American era has come to people in different ways, but the recognition is there. It's general and I'm happy to tell you that for the time being anyway, it has given the American people a lift in its simplest form, the lift is the one you get from a new coach, a new team and the hope that they have something bracing to offer.

I have friends who never had the slightest intention of voting for Mr Clinton, some of whom stayed with Bush to the end, some of whom decided at the last minute to register a protest against both principal candidates and go for Mr Perot. I've been surprised to discover how many of them say their coming round to the idea that Clinton's victory was probably a good thing and begin to have hopes for him.

This feeling has surprisingly passed over on to Wall Street and I'm sure has a lot to do with the first certain signs after more than two sluggish years that the American economy really is stirring into life and strength. The awful truth, which George Bush must find unbearable to dwell on, is that he was right in the last month or so of the campaign when he insisted that the economy was finally improving, but he'd been saying that for a year in the face of joblessness, poverty, increasing despair among the industrial states. This time he was right, but the sure signs did not appear until mid-November and, of course, this constitutes the luckiest possible break for Clinton. Though whatever your political allegiance, you have to admit that Clinton had nothing to do with it. Come to think of it, it's doubtful that a president ever has anything to do with the health and sickness of the economy, but it's a deep and unshakable and popular belief that whoever is in the White House is like the manager of a football team solely responsible for its performance.

The only grain of truth in this delusion is that, as the old Italian playwright Pirandello put it, "it is, if you think it is" and even the most sophisticated, the most tortured economist will admit that, whatever else affects the stock market. One strong influence is public confidence, so it may be that although the economy was improving at election time all on its own, yet the general superstition if you like that things were likely to get better under Clinton gave the economy the boost that was necessary to demonstrate its return to health.

I report this trend with all the more alacrity because of the bleak contrasting picture we get, and I'm sure you get, of Europe. Europe in the doldrums, the dead-in-the-water condition of the Maastricht Treaty and the prospects for European Union, the Continental-wide recession made wider still by the lapse in German prosperity. What Mr Clinton seems to have convinced enough of the voters is that he's a different Democrat, that he would forsake the 60-year-old Democrat's devotion to deficit financing, John Maynard Keynes's weighty legacy to the century, that he does not mean to be, in Mr Bush's gutsy simplification, a tax-and-spend liberal.

That phrase harped incessantly by Mr Bush during the autumn was not plucked out of the air, it takes us back to an battled time in American political history.

In the mid-summer of 1938, President Roosevelt's closest personal advisor, one Harry Hopkins, a very sick Midwesterner who heroically overcame his illness during the Second War to contrive Lend Lease to keep the Soviet Union in the United Nations, to see Europe repaired and restored through the Marshall Plan. Harry Hopkins was at a race track in New York and turned to his companion, a New York theatrical producer, and said "apropos of the next big policy move of the New Deal, we will spend and spend and tax and tax and elect and elect".

In fact, there's no proof Hopkins ever said it, but he could have. It was such a lively, memorable phrase and it did express, albeit in a ruthless form, the general philosophy of the New Deal that in no time it was picked up by Republican speakers and Roosevelt-haters everywhere, and parodied and intoned at every political meeting as a warning of the crushing future Roosevelt had in store for all of us. And it's astonishing to realise now how much political mileage the Republicans have got through successive presidential campaigns out of the threat that the Democrats knew no other political strategy than to tax the people into ruin.

When this year's campaign began, it's easy to forget now that Governor Clinton was way behind Mr Bush in the polls, partly of course, because he was unknown to the country at large, but also because he was the Democrats' latest candidate and could be assumed to be following in the footsteps of all previous Democratic contenders, all the way back to the original taxer and spender the dreaded Franklin Roosevelt.

Well, as I say, we may not have seen it by election time, but by now it's clear that Mr Clinton pulled off a small but decisive miracle of political persuasion. He really did convince enough voters, including Wall Street and the financial world, that he did not believe taxes were the only or the best way to get revenue, that tax for business, helping business big and little to new investment, was the vital impulse of an improving economy. He also made it clear in his 12 years as Governor of Arkansas that welfare was a crutch and should be fallen back on only for so long; only as long as the patient could get on his feet and instead of mooning over his last job, get trained for a new one. Governor Clinton's job training programme developed at the expense of public funds for a perpetual dole has been so successful in Arkansas, it was the main reason why at the last Governors' Conference last year that 49 other governors voted him the most successful governor in the country. That accolade no doubt offered a powerful incentive to run for the presidency.

Well, I'd love to go on bringing reassurance and good cheer in this report, a suggestion that America finally dragging itself out of the slough of recession might beckon to and help a floundering Europe, but suddenly the rosy domestic picture has faded in the past week and Governor Clinton is faced with a problem in foreign affairs as dire as anything since Vietnam. Of course, it is President Bush's initiative to send 28,000 troops into the hell hole of Somalia. He has briefed Mr Clinton every step of the way, but Mr Bush has perhaps fatally jeopardised President Clinton's future initiative by saying now that this mission is a police action, which will be finished by the 20 January, the day of President Clinton's inauguration.

What this cocky assurance does is to tip off the warlords or gangsters that they can rest up while American soldiers protect the food deliveries, no point in fighting the fearsome American marines and then resume their civil war and their looting from the famished once the American's have left. The Pentagon, for once defying a president's judgment says, "the mission cannot have a deadline that the troops might be there well into the New Year when it will become President Clinton's decision whether to call it quits or to wade into a civil war and get stuck in a quagmire the size of Texas".

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