Wisdom from a sheepish liberal

Bill Clinton's State of the Union speech had a pragmatic tone that Euro pe's leaders should heed
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It is the nature of the beast that America's annual State of the Union address should be high-falutin' waffle, and President Clinton's yesterday was no exception. But what gave it a special resonance was that it was the best possible response of a decentand talented politician of the centre-left to the whirlwind electoral victory of the right. It is a response that should be studied carefully by all politicians in Europe. For it signposts a way down the path they are likely to have to travel the mselves. See this State of the Union not just as the squirming of a wrong-footed American politician; but as a road map which will be useful for us all.

To say this, of course, raises the question as to whether it is reasonable to expect that the middle-class revolt which is driving US politics will sweep across the Atlantic to Britain and continental Europe. Drawing parallels is always dangerous. Some US social and political developments - the tax-cutting inspired by California's Proposition 13 in the Seventies, for example - have had a profound influence on the rest of the world. Others, such as the rise of Christian fundamentalism, have remained pecu liarly American. But economics, technology and demography are international forces; they affect the citizens of all developed countries in much the same way, and force governments to respond on broadly similar lines. We have not quite reached the pointw here we can assert that there is a right way of running a government and a wrong way. But the likelihood that a US political movement will cross the Atlantic is greater now than 20 years ago.

You can see this most clearly in the great debate about the appropriate controls which might be placed on governments' budgetary policy. If the US Congress passes a balanced budget amendment, as the Republicans are seeking, that would set a new standard for governments around the world: the international markets would start to require similar explicit limits on the borrowing powers of other countries, or at any rate would impose even larger risk premiums on them if they did not.

So what did Mr Clinton say on this? He did not oppose it but acknowledged the widespread support for such an amendment, asking merely for honesty in its application: "You have to be straight with the American people. They have a right to know what you are going to cut and how it would affect them. And you should tell them before you change the Constitution."

Guidance here for European politicians faced with calls to find some way of guaranteeing a balanced budget: don't fight it, just try to make sure that if it is going to happen, people are aware of the consequences.

On tax cuts, Mr Clinton said: "I want to work with you. My test for any proposal is: will it create jobs and raise incomes ... strengthen families ... shrink the underclass? Is it paid for? If it does, I will support it. If it doesn't, I will oppose it."

Translate that to Europe and the message might be this. It is not politically acceptable to oppose tax cuts in a blanket manner. If the political right pushes for cuts, the appropriate response of the centre-left is to defuse the issue by applying credibility tests to the plans. If tax-cutting plans are credible, they should be supported; if not, they should be opposed on rational, rather than ideological, ones.

On health care, Mr Clinton was defensive rather than prescriptive. "Last year, we bit off more than we could chew. This year, let's work together, step by step, and get something done." US health care is in a far greater mess than any of the European systems, but the notion that reform of health systems should be a practical, detailed process rather than a ideological, or worse, an emotional one, is surely a useful thought. Certainly in the UK, health reform is not discussed as a technical issue - how to improve efficiency, how to establish greater consistency of standards, how to feed in additional resources in the most cost-effective way. There is no concept of working together, step by step. There should be.

On social security, or in US parlance, "welfare", Mr Clinton acknowledged the need for reform. Where he stood his ground was that any such reform should not hit the most disadvantaged. "We shouldn't cut people off because they are poor, young, unmarried.

We shouldn't punish poor children for the mistakes of their parents."

There is a key point at which European liberals should also stand their ground. If they acknowledge the need to contain the costs of social security budgets and admit that there are many abuses of the system, they become all the more credible when they seek to protect the rights of the most disadvantaged and, above all, children. But pretending that the European social security systems can be simply preserved is not credible - for demographic reasons alone that cannot be done.

Part of any such rethinking of European social security systems would certainly include pensions reform. Mr Clinton did not tackle that in his address, but the application of his principle of honesty in public finance would mean that European national insurance schemes would have to move to a funded basis. Each generation of workers paying for their state pension would build up a real fund, invested on their behalf, which would be drawn down when they took their pensions, rather than paying for the previous generation of workers. (If this sounds absurdly radical, it is how Singapore's Central Provident Fund works.)

The tone of the President was understandably sheepish; the reply of the Republicans roundly triumphant. The Governor of New Jersey, Christine Todd Whitman, who gave the formal response, said that some of the President's ideas were "pretty Republican", a backhanded compliment. But even if only one-quarter of the Republican programme makes it to Europe, expect more of this managerial approach and less of the traditional politician's bombast.