Monday, July 13, 2009

Obama losing support over economic policies

Business Times - 14 Jul 2009


Obama losing support over economic policies

His popularity is falling even among independents and voters who helped him win election

By LEON HADAR
WASHINGTON CORRESPONDENT

US PRESIDENT Barack Obama returns to Washington this week from a week-long global tour that had taken him to Moscow (where he tried to repair US relationship with Russia) and to Italy (where he attended a summit of leaders of the world's major economies). Then he went to Ghana, in sub-Saharan Africa, the continent where his Kenyan father was born, and where he was welcomed by enthusiastic crowds, 'as if his arrival were a long-awaited homecoming', as The New York Times put it.

But unfortunately for Mr Obama, he was not going to be greeted with the same degree of warmth on his arrival in Washington.

The political honeymoon with Congress, the media and the American people that the new president seemed to be enjoying since his inauguration is clearly over. Obamania may still be alive and kicking in Accra, Ghana and in other parts of the world. But many Americans and their representatives in Congress, including many Democrats, seem to be losing patience with Mr Obama over what they consider to be his failure to revive the ailing American economy.

Indeed, most opinion polls indicate that public support for the president's agenda is beginning to slip. Hence, a July CNN poll puts his overall job approval rating at 61 per cent, down from 76 per cent in February, while a Gallup poll found that Mr Obama averaged a 58 per cent job approval rating in July, down from an average of 61 per cent for June.

More worrying for Mr Obama is the fact that his popularity and the approval for his handling of the economy are falling among independents as well as among voters in 'swing states' such as Ohio, Michigan, Florida and Indiana that had made possible for Mr Obama to win the 2008 presidential race.

For example, in a recent poll by Quinnipiac University, 48 per cent of voters in Ohio said they disapproved of Mr Obama's handling of the economy, while 46 per cent approved, down 11 percentage points since May.

Most political experts agree that without clear signs that the White House's policies, including Mr Obama's US$787 billion stimulus plan, are setting the stage for an economic recovery, Mr Obama will see his approval ratings continuing to fall.

And from that perspective, the recent economic numbers are not encouraging. Unemployment continues to rise and stands now at 9.5 per cent with most observers, including top administration officials, expecting it to exceed 10 per cent in the coming months.

Vice-President Joe Biden, who this week visited Ohio, where like in Michigan, Indiana and Florida unemployment is already above 10 per cent, has admitted that the administration 'misread how bad the economy was'.

Facing growing public and Congressional discontent with his economic policies, Mr Obama insisted during his weekly radio address on Saturday that the stimulus plan helped prevent an economic catastrophe and created the conditions for a recovery.

'As a result of the swift and aggressive action we took in the first few months of this year, we've been able to pull our financial system and our economy back from the brink,' Mr Obama said. He also called on Americans to remain patient and suggested that his economic policies would start to work next year.

While some economic analysts point out to signs of improving economic conditions, including a slight rise in consumer confidence and home sales as well as some indications that the financial markets are beginning to unfreeze, political observers explain that the economic numbers that remain the most politically sensitive are the unemployment figures.

The White House could find itself in a major political quandary if more Americans conclude that Mr Obama's stimulus plan and his other huge government spending programmes are not restoring the health of the American economy and are actually creating larger budget deficits and raising fears of inflation.

In that case, even Democrats in Congress will be hesitant about backing Mr Obama's ambitious and very costly plan to reform the American healthcare system and his other expensive programme to deal with climate change. And the White House would certainly discover it a mission impossible to win Congressional backing for another stimulus package.

And then there is the so-called 'wealth effect' that was responsible for the huge increase in consumer spending during the economic boom when more Americans perceived themselves to be richer as a result of the rise in the assessed value of their homes and the stocks they owned (mostly through their pension programmes).

Since the start of the current recession and the collapse in the value of their homes and stocks, the majority of middle-class Americans perceive themselves to be poorer; in some cases by more than 30 per cent.

That explains their continuing reluctance to go on new shopping sprees, which reduces the chances for speedy economic recovery and erodes the overall public support for Mr Obama and the Democrats.

After all, an American consumer who cannot spend is also by definition an angry American voter who wants to see change in Washington.

Mr Obama, at the same time, could find it more and more difficult to blame his predecessors and the Republicans for the nation's economic problems. Now it's a case of: 'It's the Obama Economy, stupid!'


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