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Le Monde, France

Obama II:
What Economic Plan?

By Sylvain Cypel

Translated By Alexandre Ciric

16 November 2012

Edited by Heather Martin

France - Le Monde - Original Article (French)

Of course he will have to overcome the “fiscal cliff” without a scratch because this institutional deadlock, if not resolved, will see Americans pay higher taxes and have their public funding cut — social security, public education, etc. To avoid this, the Democrat Barack Obama will have to negotiate a reduction of the national debt with the Republican Party, which has adopted a much tougher stance than that held during the last negotiations in August 2011.

Mr. Obama believes that his re-election granted him the opportunity to raise taxes on companies and the wealthiest individuals. However, roughly half of Americans are skeptical of a compromise being reached between the two parties. On the other hand, political scientists are more optimistic. The strategy of institutional deadlock has been very costly to the Republican Party, in disarray after its defeat in the presidential election.

Nonetheless, Mr. Obama can hardly begin his second term in failure. Most experts and analysts are saying that recent studies predict that the country would enter into a new recession without a commonly approved agreement on the budget reduction. In addition, Mr. Obama is henceforth naturally concerned with the political legacy that he will leave.

After his first press conference after his victory on Wednesday, November 14, he indicated that he would challenge any reduction of the budget. Between new revenues and reduced public spending, the president proposed a “balanced” 10-year plan that will reduce the national debt by $4 trillion (3.1 trillion euros) while keeping health care costs — which are extremely high in America — down and sustainably financing Social Security. The last two points are key hurdles to overcome, as the absence of a universal protection system weighs the U.S. down more than any other developed country.

President Obama has a plan that by not burdening any recovery with debt will help share the wealth with the “middle class” — in the sense that includes small business owners, freelancers and other workers. If the president had only one objective for his second term, it would be to “help the middle class” regenerate itself, he insisted.

However, Mr. Obama has already announced this project… four years ago. Roosevelt launched the New Deal, proposing a “refounding” of the U.S. economy three months after his inauguration. The term quickly disappeared from his remarks, but not the idea. It consisted of cleaning up the banking sector to revive the flow of credit and consumption, pillars of U.S. growth, and hence, jobs. Secondly, he attacked two problems: The “refounding” of a class better paid and better protected in order to reduce Americans’ private debt and “refounding” growth so it is less dependent on credit due to increased purchasing power.

Alas, three years after the height of the recession, the economic situation has definitely improved — or else Mr. Obama, regardless of his talents, would not have been re-elected. However, the situation has benefited the financial sector, which has rediscovered its profits, as well as the industrial sector, which has greatly increased its productivity, as well its employees. On the other hand, the growing debt of American households has never reached the level it is at today. The number of college graduates in debt because they are unable to find a job has exploded in four years. Around 62 percent of personal bankruptcies are due to the inability to pay back health care costs. This is mainly due to a grim statistic put out by the Census Bureau: In the last decade, the average American salary decreased by 16 percent between 1999 and 2011.

The growing overall debt resides in declining purchasing power and widening inequality. At the moment that the newly re-elected president was giving his first press conference, the Census Bureau published numbers showing that the number of Americans living in poverty has increased from 49.1 million to 49.7 million from 2010 to 2011. It seems as if the exit of the “debt-driven economy” that created the financial crisis is more important than these recent numbers.

After a much tighter victory, Obama’s second presidency (“Obama II”) will be more engaged than four years ago. At the time, the recession appeared. Americans were obsessed with the rise of China and the rising price of oil. Today, their “confidence in the economy” is slowly growing and their energy worries have been put to rest by the recent discovery of subterranean oil and gas reserves — nonetheless, the specter of China remains and grows to the whole of Asia. To lay the foundation for “refounding” the economy, Mr. Obama means to create jobs and more importantly “good jobs” — thankfully — particularly the revival of sustainable goods production, an initiative shared as much by the left as the right.

However, for a number of economists, now that the reindustrialization will concentrate on several high-tech industries involving highly skilled technicians and robotics, it will certainly create jobs, but the large-scale number promised is not a guarantee. This limit to the new ideal of “made in America” is far from the popular debate.



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