Wednesday, April 29, 2009

Obama's real tests yet to come

Business Times - 30 Apr 2009

Obama's real tests yet to come

Putting America's economic house in order is his main challenge and the one that may determine his political legacy


WHEN a future historian examines US President Barack Obama's first 100 days in office, he or she will not be able to point to any major international crises that could have tested the new White House's occupant's performance as a commander-in-chief.

It is true that giving a green light to US commandos to kill three Somali pirates and rescue a kidnapped American captain may have been another demonstration of Mr Obama's gift of maintaining his cool under pressure. But the incident and its successful outcome could not be compared to, say, President John Kennedy's Cuban missile crisis or, for that matter, President George W Bush's response to the 9/11 attacks in New York and Washington.

And while Mr Obama did take Europe by storm during the G-20 summit and lifted travel and money transfer restrictions on Cuba, it is doubtful that these activities and statements - such as announcing the start of negotiations to limit nuclear arms, and policy moves such as naming former senator George Mitchell as a special Middle East envoy - will change the course of history. They sound great. We all want to end the nuclear arms race and bring peace to the Middle East. But these things are probably not going to happen any time soon. Meanwhile, American troops remain in Iraq and Mr Obama decided to deploy more US forces to Afghanistan. That is not very 'transformative'.

On the domestic front, the new president provided a sense of drama during his first 100 days in office when he announced that he was banning US soldiers and intelligence agencies from using torture, and released official documents that detail instances of torture that took place under his predecessor.

Mr Obama's ban of torture restores American commitment to the rule of law under which US administrations had conducted interrogations of prisoners of war during the pre-Bush era. But that decision does not amount to a momentous change.

If anything, Mr Obama and his aides have rejected pressure from leading Democratic lawmakers to punish the Bush administration's top officials who were responsible for what happened in Gitmo and Abu Ghraib.

On another level, Mr Obama's first 100 hundred days in office have established beyond any doubt that the American people have elected an intelligent and charming president, a smooth operator who seemed to be handling the business of governing with skill and style.

And together with his very hip and classy First Lady and two very cute daughters, Mr Obama seemed to have captured hearts around the country.

Mr Obama's personal magnetism has clearly contributed to the new president's popularity among Americans who, according to most opinion polls, are continuing to give him high grades for his performance in office. Hence, according to the recent Washington Post-ABC News poll, 63 per cent of Americans agreed that Mr Obama has achieved 'a great deal' of 'a good amount' during his first months in office.

Sixty-nine per cent of the public, including a large majority of Democrats and independents, approve of Mr Obama's job as president while 60 per cent of them have confidence in the new president to make the right decisions for the country's future.

Historically, most US presidents have traditionally enjoyed a political honeymoon during their first months in office only to see their popularity drop later on. And while pollsters have proposed that long-term demographic changes may favour the Democrats who seem to enjoy increasing support among young voters, educated professionals, African-American and Hispanics, Mr Obama's ability to maintain his status as a popular president and his chances of getting re-elected in 2012 will depend very much on whether he will succeed in halting America's current economic decline that threatens its status as a pre-eminent global power.

Indeed, putting America's economic house in order is clearly Mr Obama's main challenge and the one that may determine his political legacy. His election took place in the midst of, and as a response to, a perfect economic storm including the busting of the housing bubble, a sudden financial crunch, a Wall Street and market meltdown, rising unemployment and a collapse in consumer confidence. And all this at a time in the nation's history when a large majority of Americans were telling pollsters that they did not believe that the country was moving in the right direction.

It was not surprising therefore that almost every one of those first 100 days has been dominated by his management of the worst crisis facing the American economy since the Great Depression of the 1930s. And in that context, the three months or so since Mr Obama took office has seen a lot of headlines with large dollar numbers.

In fact, no US president has overseen such a gigantic increase in borrowing on the part of the federal government: US$2 trillion for the bailout of Wall Street; a US$787 billion economic stimulus package; a US$410 billion supplemental spending bill, and a US$275 billion plan to avert home foreclosures.

Add to these huge sums Mr Obama's proposed budget of US$3.5 trillion - including a US$634 billion, 10-year 'reserve fund' for health care - and it is not surprising that the Congressional Budget Office has estimated that his budgets could add to US$9 trillion to the national debt over the next 10 years or so. The numbers are indeed mind-blowing - which explains the newspaper headlines and the animated debate of Mr Obama's fiscal policies in Washington and around the country. Mr Obama and his supporters are confident that his ambitious and costly economic strategy, coupled with the Federal Reserve's monetary policies, will pull America out of its economic free fall.

And they hope that his grand plans to reform the health care system, tackle the rising economic inequality and promote new 'green' industries will mark the end of an era of economic and social policy dominated by the Republican laissez faire agenda, and usher in a new age in which an activist and more interventionist federal government will preside over the regeneration of the American economy and society.

They also hope this will result in new political realignments that favour the Democrats and their liberal agenda.

The same opinion polls that reflect Mr Obama's popularity among voters also point out to the general optimism about the national economy that increased during Mr Obama's first months in office. Most Americans support the economic stimulus package and are holding cheery views about the prospects of an economic recovery.

But equally, there are also signs of growing uneasiness about the spiralling federal government deficit and use of tax-payer money to shore up Wall Street and the car industry.

In short, the jury is still out. Sorting out Mr Obama's legacy as president will take longer than 100 days. What the future historian will have to conclude is whether his policies - based on massive government spending, most of it on borrowed money - had ended up changing history for the better in the form of growing America's economy and raising its prosperity. And that, by extension, had helped transform American society and political system.

Or to put it differently, will the historical narrative that will be examined in 2020 reflect the hopes and the dreams of those who were counting on the new president to emerge as an agent of change? Or will the 2008 election's only real historical significance lie in the fact that there was an end to the racial barriers of the past, leading to the election of the first African-American president, while failing to create the conditions for American economic renaissance?

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.


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