Can Obama Still Succeed?

There have been many changes a year after the inauguration of Barack Obama! In January 2009, America enthusiastically celebrated the inauguration of their new president to the White House; today, it is as dubitative and divided as ever. Some 68 percent of Americans originally supported the policy that Obama was ready to put in action, but after seeing how everything has played out, only 49 percent of people support it today.

The economy was in free fall and we worried about a repeat of the Great Depression. Today, recovery is here. The financial markets have regained lost ground, but the unemployment rate is above 10 percent and, for many, this instability sparks worry. Economics and politics are more closely associated than ever. The victory of Barack Obama was unquestionable, but what was in his mandate that made the voters confide in him? Perhaps there was a misunderstanding?

The defeat of the Democratic party to fill the seat left vacant by the death of Ted Kennedy dramatically shows, in any case, the primary viewpoint that “the country is still not on the right track.” Barack Obama’s political future is in the balance again; the Senate may be paralyzed and all eyes are now fixed on the next replacements in the House of Representatives: A big battle is expected in November 2010; it has already started. After eighteen months of economic and political turmoil, how is America preparing for her future?

Barack Obama inherited the most dangerous economic situation observed since the 1930s. People were panic-stricken: the GDP declined annually by a margin of 5 percent; net job losses add up to more than 500,000 each month; finances were on the verge of collapse. The president took on the economic challenge full force: “There is a seriousness and an intensity right now, it’s extraordinary,” summarized an observer when the new administration took its post and committed to a massive recovery plan worth more than $700 billion.

In addition, after hesitation from the Bush administration, the Treasury, led by a new secretary, Tim Geithner, found a course of action that was finally going to clear the financial horizon. Judging by the results, it rouses little doubt that Barack Obama and his team took precautions that prevented a cumulative damage of activity like what we observed between 1930 and 1932.

But this did not prevent unemployment — and the general worry that accompanies it — from increasing from 7.5 percent to 10 percent (even more so in reality, due to the “disheartened” workers who now exclude themselves from the labor market). The dissatisfaction of Democratic voters plays a big role in the feeling that the new administration did not take on all that it could have in order to put an end to this nightmare.

At the same time, we have very quickly seen the political split widen. From John McCain’s defeat, Republicans concluded that they had lost in order to give in to radical populism, as of late portrayed by Sarah Palin, “pro-life, pro-gun, pro-America.” Contrary to the Senate’s long political tradition, the outstretched hand of the majority vote was never seized. The Republican opposition became more extreme and the summer of 2009 saw an increase in the number of town events and other tea parties violently hostile to the new president. Tom Friedman, a star editorialist for the New York Times wrote: “What we have seen from the extreme right is a case that involves their legitimacy; it’s an extremely dangerous climate that reminds us of what we have seen in Israel in the months that preceded Rabin’s assassination.”

Because we are familiar with the violent political history of the United States, these statements make us nervous. Despite the disaster that led to eight years of Republican economic politics, despite the economy that was left to plunge into the abyss, no course of action found mercy. Overall, the Republican platform is defined by the hostility that is portrayed with each government intervention.

In this context, the White House has a goal: to avoid the fate of Bill Clinton, who was brilliantly elected in 1992, but faced a legislative defeat in 1994 that established a strong Republican majority in Congress for 14 years. To avoid or at least limit the traditional decline of the president’s political party in the mid-term elections is a guiding thread that gives meaning to all the president’s initiatives. For nine months, the criticisms were countless: socialist for some people, in the hands of Wall Street for others, too many priorities, not enough personal involvement, indecisive, sacrificing the security of citizens to abstract ideas or, on the contrary, renegade in terms of human rights and liberty — what did we not hear?! And yet, the course of action is clear enough: This president is not hesitant; he is systematic. In 2009, after economic recovery began, there have been two subject matters — and only two — that completely dominate the political agenda: Afghanistan and healthcare.

More in the United States than elsewhere, the president commits political suicide if he leaves himself open to weak accusations. The main priority is to extract America from the Iraqi plight. There was no other solution for the candidate but to choose the soil where the president would display his strength; it would be Afghanistan.

Unfortunately, the deteriorating military situation created a more than delicate political situation by hardly permitting any choice other than the unpopular reinforcement of troops. Hence, at a reasonably close date, these long preparations certainly had a goal to “declare victory” on the ground, to organize the return of the boys and, meanwhile, to tame the public opinion. The risk of collapse was taken into great consideration, but this equation, though apparently insolvable, was resolved — at least temporarily; the decision was well-suited, and even more so after the failed attack in December 2009. It must be expected that the question of security feeds popular fears and political battles.

Healthcare, the central promise of the campaign, is the mother of all reforms, one that no president has succeeded in doing for a half-century. Months of effort led to a start on a compromise that had every chance of being adopted by Congress. The Republican barrage, though, was a rare violence; it was also necessary to overcome countless different views and opinions between Democrats. The president was criticized for not having exercised sufficient leadership, but the accusation was poorly misplaced.

No reform is possible in the United States without agreement among different factions in order to unite a coalition of 60 votes in the Senate. The White House has constantly worked to revive the initiative, call upon hesitant voters, heal the wounds and propose new compromises. Today, the bill is in danger and possibly condemned; a majority of Americans oppose the project — the victory of the Republican candidate in Massachusetts is an example — but the president will not give up because the country urgently needs reform. In any case, this reveals that the defeat of this reform is due to the malfunctioning American democracy: the undemocratic nature of the Senate, the exorbitant pressure from lobbyists, the need to buy elected officials’ votes one by one, and, more than anything else today, the violence of partisan relationships.

The collapse of the financial system that many feared a year ago was avoided, but the president still receives little political benefit from the situation. Remember that the massive support measures adopted by the Bush administration in the period of time after the bankruptcy of Lehman Brothers turned out to be ineffective. We should give credit to Tim Geithner for the program launched that Spring. The banks were required to develop resistance tests in order to verify their stability and the Treasury confirmed the results. The American Federal Reserve, flooding the financial sector with free liquid assets, shows that confidence has returned and the financial networks have been reactivated; this is what everyone has been waiting for.

And yet, this return to a better situation has sparked questions and criticism. The big banks, “too big to go bankrupt,” returned to their previous behavior. Profits and income are back as if nothing had happened. Now, they seem directly financed by taxpayers’ money: Public opinion, already suspicious of the intervention of the state, was angered by seeing Wall Street booming while recovery still remains an abstraction to most. Partly due to an unjust lawsuit, where would we be if the Spring rescue had failed? But it’s the perception that the voters have that regulates the political games and the response to the financial disaster is, in this respect, also a part of the disillusions of 2009.

Therefore, it is not surprising that the president has already taken the initiative in this area by restating his criticism of “obscene” incomes and presenting a taxation project for investment banks that would put them on the right track. We can expect that this will be the next battle in Congress.

After the State of the Union address at the end of January, the budget for 2011 will be presented. The official report is simple: The federal government is battered and worn out. The 2009 deficit reached $1.4 trillion — 11.2 percent of the GDP — and future prospects are unstable. Presidential criticism coming from the left from people such as Paul Krugman, constantly calling for recovery efforts again, continues to minimize a danger that is still hovering close by. The most menacing history lesson in this respect came from an old economist of the IMF in a book ironically entitled, This Time is Different.

As a matter of fact, the outcome is always the same; the financial crisis ends in a fiscal crisis. This is what voters will discover in horror as they come to regret the “good” deficits — for example, those created by the Bush administration in order to reduce taxes. The financial strain is here, the duties of the Treasury are becoming less and less attractive and, fundamentally, there are only two buyers left: the Fed, who converts its purchases to money, and foreign investors. Will China cover its eternal needs?

China, in any case, is following more and more closely the financial politics of its main debtor. The authorities publicly expressed their concern about future savings invested in dollars and even advanced propositions in favor of a new international currency. They have also, more discreetly, intervened in the preparation of the healthcare plan by expressing, at a bilateral summit in June 2009, the view that this reform will lead to better control of the deficit than in the last ten years.

When Barack Obama made an official visit to China, the New York Times headlined: “When the president will see his banker.” It is a new idea — and an unpleasant one, at that — for America, which never had to pay someone back! Always dependent on the renewal of its external funding, the White House — in order to respond to some trade union expectations — created another disagreement by imposing a 35 percent tax on the importation of Chinese tires in September. This decision is in compliance with legal obligations, and has, in economic terms, a small range.

But it sparked a reaction, more than irritating the Chinese authorities, who reacted with a volley of retaliations, accompanied by the nationalist reactions broadcast regularly from then on out on the internet. All this competition was created in order to establish an intensified tone with China. The year 2009 will have, without a doubt, seen both the birth and death of the G-2 idea.

Finally, President Obama’s first year taught us, without a doubt, more about America than about the president as a person. We can give him credit for not having committed a major error during a dreadful situation and for having restored America’s image throughout the world. He proved that he had seriously decided to find a “victorious” solution in Afghanistan, to stabilize a free-falling economy and to take on a fundamental structural reform by coming closer to his goals than any of his predecessors.

America is not satisfied with its balance sheet and is panicked by having discovered its weaknesses. In the face of today’s difficult situations, Americans are desperate to find a solution. America is worried about the rising Chinese power; how should it react? The country is paralyzed by crisis, but where can Americans put their confidence? They fear instability, refuse taxes and reject state intervention.

But America will not be able to indefinitely reject choices. After the [Democratic party’s] defeat in the Massachusetts election, a reexamination of strategy is, in any case, clearly called for, especially with the rising popularity of populism, which is opposite the ground on which the president intends to host political debate. Obama will remain faithful to what he considers to be the brain of America. He will not yield to the confrontation that some recommend. The second year of the presidency is going to be even more difficult than the first. America will be even more political, keeping in mind the mid-term elections. Barack Obama has the ambition to be, after Roosevelt and Reagan, a “transformational” president, supposing that this goal has not yet disappeared. He is always trying to push America to recreate its destiny, but it is not an aspiration that will be fulfilled in a year!