TODAY'S INAUGURATION marks a peaceful transition of
                    power during a period of unprecedented prosperity for this nation.

                    There is a lesson in how we got to this point that incoming President George
                    W. Bush ought to heed.

                    Eight years ago, when Bill Clinton took the oath of office, he inherited from the
                    senior George Bush an economy in recession, with 7 percent unemployment
                    and sky-high budget deficits.

                    Had Mr. Clinton adhered to traditional Democratic theory -- inflationary
                    policies to help create jobs, more government spending, more federal debt --
                    we would face a deficit now the size of the Grand Canyon.

                    Instead, the new president broke the mold. He embraced policies that steered the
                    Democratic Party away from its historical roots, toward a centrist economic position
                    that accepts certain aspects of conservative, market-driven Republican theory.

                    Along the way, he became a graduate student of the economy, absorbing lectures
                    given by Federal Reserve Chairman Alan Greenspan, a revered Republican economist,
                    and Treasury Secretary Robert Rubin, a successful Wall Street capitalist.

                    What emerged was an unconventional approach for a Democratic president
                    that led to higher taxes not to expand services but to slow the growing deficit;
                    budget cuts to help lower interest rates; and in recent years of surplus, a focus on paying
                    down the federal debt instead of embarking on spending sprees or giant tax cuts.

                    This strategy succeeded beyond Mr. Clinton's wildest dreams. As government
                    deficits began to shrink, fewer government bonds were required. That freed up
                    money on the financial markets for private-sector investments, especially in
                    technology that vastly improved business efficiencies.

                    This, in turn, set in motion a prolonged expansion that is only now starting to
                    moderate. More than 20 million private-sector jobs were created.
                    Unemployment stands at 4 percent, near a 30-year low.

                    We're far better off, economically, than we were eight years ago.

                    Mr. Clinton took the advice of free-market thinkers and economic
                    conservatives. He positioned the country -- with major help from the Federal
                    Reserve -- to take full advantage of the new Internet Age. It wasn't a
                    Democratic policy he implemented, or a Republican agenda. He chose a
                    pragmatic route, which has come to be known as the Third Way.

                    The outgoing president turns over to George W. Bush an economy that is still
                    vibrant, though showing signs of a necessary cooling. Recession isn't a
                    likelihood, according to most economists. That much-discussed "soft landing"
                    Mr. Greenspan is trying to produce could be bumpier than he wished, however.

                    Like Mr. Clinton, Mr. Bush enters the presidency with a set of political
                    pledges that may have to be jettisoned to keep the economy on track. In a
                    perfect world, President Bush could reward Republicans with a $1 trillion-plus
                    tax cut, as promised; cut government spending, as promised; and dismantle
                    much of what the Clinton administration has erected.

                    But that doesn't mesh with either the economic or political realities. Much like
                    Mr. Clinton, President Bush is faced with a situation that doesn't lend itself to
                    an ideologically driven solution.

                    A sharply divided Congress will require Mr. Bush to abandon his hard-edged
                    campaign rhetoric on the economy if he wants to get results instead of
                    gridlock. And a slowing, but still-growing, economy calls for tender
                    presidential nurturing, rather than a shock treatment of massive tax cuts.

                    The Third Way succeeded for Mr. Clinton because it was based on what
                    worked, not on what party ideology demanded.

                    Presidents must be flexible. They must set aside party platforms. Keeping the
                    economy humming so more jobs are created should be uppermost on Mr.
                    Bush's mind. Keeping the federal government in surplus for years to come is
                    what people want to see happen.

                    If that calls for unorthodox political steps or a quest for common ground with
                    the opposition, Mr. Bush should seize the opportunity. The country's
                    well-being is what counts, not whether it's a Republican or Democratic idea.