Obama Faces New Budget Headache

Certainly, occupying the White House has never been a sinecure, but Barack Obama is entitled, this year, to a particularly rough return to work. The Syrian issue is the most burning one on his desk. We know that the president is restive to the idea of a whole new military engagement, just like public opinion. The Syrian issue is, in addition, much more explosive than the Libyan case. Damascus has a better outfitted army and some powerful allies. Regardless of this, Bashar al-Assad doesn’t give Obama a choice. If he is actually responsible for the gas attack in August, he will have crossed the “red line” defined by Washington last year. Not responding to it would undermine the credibility of the United States and could give other regimes ideas. Facing the lack of conviction from his compatriots and the British refusal to participate in an intervention, the American president decided to consult Congress last week, which he has no obligation to do. He simply hopes to assure himself of strong political support. This, notwithstanding, is a dangerous game with the U.S. Congress so on edge; some Republicans are always ready to create difficulties for him on every issue. The debate on Syria might, in addition, slow or delay negotiations on the economy.

Because representatives come back to Washington D.C. on Sept. 9, they already have a lot to do. They have exactly three weeks to come to a budget agreement, otherwise the federal government, will simply close on Oct. 1. Yet a lot of reporters expect an “autumnal chaos.” We know that Congress has been particularly on edge for some years now, most notably on fiscal and budgetary questions. During the summer, the most extreme fringe Republicans made plans on their return to rehash the debate and institute the de facto dismantling of the new healthcare law — the greatest success of the president’s first term. Indeed, they don’t want to vote on a budget that includes funds for the Affordable Healthcare Act, or “Obamacare.” The more moderate Republicans are hesitant to follow them. They suggest delaying the application of Obamacare by a year or, still better, making the 2014 budget debate about raising the debt ceiling, not Obamacare. They suggest this course because federal spending is quickly approaching the debt limit. Without a resolution between the two parties, the Treasury could go into default as soon as mid-October. The United States cannot support a closing of the federal state for a few days.

A default on the debt would create a burden more ravaging in the eyes of investors. It is not certain that the worst will happen, but conditions aren’t favorable. The leader of the Republicans in the Senate, Mitch McConnell, who often plays an intermediary role between the parties, is under pressure. He is up for re-election in Kentucky next year against the ultraconservative Matt Bevin, who could force him to take a more far-right stance in coming months. Everyone in Congress already has the 2014 mid-term elections on their minds. The ambiance promises to be grueling in Washington. During the summer, when Barack Obama extended a hand to the Republicans by proposing to lower taxes on businesses against temporary taxes of profits earned overseas, the GOP derided his offer as a new crypto-socialist passing fancy.

Another delicate issue is the nomination of a successor to Ben Bernanke to head the Federal Reserve. Two candidates are in the lead: Janet Yellen, the current vice president of the central bank, and Larry Summers, the former secretary of the Treasury under Bill Clinton and former adviser of Barack Obama. This summer we read that the president is leaning toward the latter, with whom he is closer. But, for many, Larry Summers is seen as an arrogant person, misogynistic and especially responsible for the deregulation at the end of the 1990s that helped birth the subprime mortgage crisis. Many Democrats are arguing for Janet Yellen, because she would feminize the present economic team. As the former president of the San Francisco Federal Reserve, she also has the advantage to plead especially for regulation which is the current trend. Barack Obama, who doesn’t miss an occasion to recall the necessity of changing the mentality of the finance world, isn’t able to produce a convincing track record for middle Americans who have lost their homes. Three years after adopting the Dodd-Frank law, which sought to prevent a new financial crisis, only 40 percent of the provisions have been applied.

Of the two nominees, Janet Yellen is also the one who would be most occupied with the issue of unemployment. That would not be a luxury. The unemployment rate is only going down slowly, and not due to massive job creation. Most new jobs have emerged in hotels and restaurants, require few qualifications and are poorly paid. The median hourly salary has slowly increased. Numerous Americans have given up looking for work according to the Express Pros: discouraged applicants, young people delaying their entrance into the job market, the disabled, whose numbers are increasing, and parents who prefer to stay at home rather than hire an nanny. The median middle class income is 6.1 percent down from its peak in Dec. 2007. As Barack Obama emphasized Wednesday during the 50th anniversary celebration of the Martin Luther King “I Have a Dream” speech, “Upward mobility has become harder.”