Tuesday, November 23, 2010

Bad Omens for Obama -- and America

Business Times - 24 Nov 2010


Bad omens for Obama - and America

Washington may experience a legislative and policy gridlock if Republicans decide to take the uncooperative route

By LEON HADAR
WASHINGTON CORRESPONDENT

IF YOU want to understand the direction US domestic and foreign policies will go in the last two years of the first - or only - term of President Barack Obama, keep the following things in mind.


In less than a year - just after Labor Day 2011 - American policymakers, lawmakers, the media and the rest of Washington's power elites will be getting ready for the presidential and Congressional elections of 2012.


Winning in 2012 is going to become the top - and perhaps the only - priority, setting the agenda of almost everyone here, from the White House occupant and the Republican and Democratic Congressional leaders to the lowly government bureaucrats and Capitol Hill staff.

No one is probably going to challenge Mr Obama for the Democratic Party's presidential nomination, although a few pundits have been urging the current president to announce that he would not seek another term and invest the next two years in making difficult and sometimes unpopular policy choices instead of trying to win public support by doing what is popular.

The problem is that by becoming a lame-duck president, Mr Obama will not be taken seriously by any player in Washington - or for that matter by any foreign leader. Why make a deal with someone who is not going to be in charge in a year or two? Let's wait for the man or the woman who is going to be there in 2013.

And you know the woman everyone is thinking about; a hint: she used to see Russia from the window of her house before she started starring in reality television shows.

But even if a member of the progressive wing of the Democratic Party decides to challenge Mr Obama for the nomination (outgoing Democratic Senator Russ Feingold is being mentioned as someone who might decide to do that), the most important factor shaping the policymaking and the legislative process in the near future - and, in that context, the relationship between the White House and Congress - will be the struggle for political supremacy in the Republican Party, including the one taking place during the party's presidential primaries.

Indeed, the newly elected Speaker of the House of Representatives, John Boehner of Ohio, and Senate Minority Leader Mitch McConnell of Kentucky are going to be the two Republicans to watch in the next few months.

With Republicans in control of the House and with their new power in the Senate - in fact, the Republicans together with several conservative Democrats will determine the legislative outcome of the Senate - Speaker Boehner and Senator McConnell will be facing difficult choices in the next two years, starting with the Big One:


Should the Republicans embrace cooperative approach towards the White House and try to reach compromises with the Democrats over reviving the economy and balancing the federal budget and the proposed pieces of legislation on the environment, immigration and trade?


Or should the Republicans continue to play the role of the Party of No - rejecting each and every - bad or good - idea proposed by the White House, a strategy that seemed to have worked out for the Republicans in this year's midterms and that could help them achieve what Mr McConnell has described as the main objective of his party - ensuring that Mr Obama doesn't get re-elected in 2012?

After all, Mr McConnell understands that any president - even one confronting a hostile Congress - still has the power to veto critical pieces of legislation approved by the lawmakers. The result: President Obama may not get his way, but neither will the Congressional Republicans. Instead, Washington could experience a legislative and policy gridlock, especially if the current conventional wisdom - that the Republicans will probably decide to take the uncooperative route - is correct.

If that happens, all the effort to use fiscal measures - increasing spending and/or cutting taxes - to accelerate the economic recovery will stall. This will force the Federal Reserve to use its monetary tools, which could only embroil the central bank more and more in the bloody partisan bickering in Washington, making the recent Republican attacks on Ben Bernanke's second round of quantitative easing look like a walk in the National Mall.

Indeed, Mr Bernanke seemed to have joined Mr Obama in becoming a favourite political punching bag for the Republicans, and that included presumptive presidential candidate Sarah Palin, who are expected to call for more Congressional auditing of the central bank and to demand limiting the Fed's activities to maintaining price stability and controlling inflation to end its so-called 'dual mandate' - dealing with the issues of inflation and 'maximum employment'. She argues that maintaining full employment should not be a concern of the Fed.

In any case, the Fed is not only in danger of being politicised, but also of losing its credibility in the eyes of investors.

Gridlock in Washington could also mean that the recent proposals by two independent bipartisan commissions to cut the federal deficit will prove to be DOA (Dead on Arrival) when the new Congress opens for business next year. Even under the best-case scenario of, say, bipartisan love affair in Washington, it would have been difficult to win Congressional support for slashing political sacred cows such as the national insurance programme (Social Security), the government's health programmes for the poor and the elderly (Medicare) or the gigantic defence budget - these are the three major reasons the deficit keeps rising and rising - not to mention raising the retirement age or adopting new tax programmes, a value added tax, for example.

But in a political and legislative environment dominated by ugly partisan sentiments, expect the Democrats to resist even the most minor cuts in federal social and health programmes while the Republicans are bound to reject - no 'ifs' and 'buts' - any plans to raise taxes.

If anything, the Republicans have suggested that they are planning to 'repeal' the healthcare insurance programme passed by the Democratic-controlled Congress and to hold televised Congressional hearings to investigate allegations that the Obama administration's economic stimulus programme was used to provide favours to pro-Democratic constituents.

Another potential victim of a gridlock could turn out to be US foreign and trade policies. A preview of what we could be seeing next year has been opposition by top Republican leaders to have the Strategic Arms Reduction Treaty (START) - a revised version of a 1991 deal that reduces the strategic nuclear warhead arsenals that both the United States and Russia maintain - to be ratified during this session of the outgoing Congress.

This is despite the fact that major Republican foreign policy figures (such as former secretaries of state Henry Kissinger and James Baker) support immediate ratification and warn that not doing that could harm US relations with Russia in a big way.

Moreover, some of the new Republican lawmakers associated with the Tea Party movement seem to have reservations about supporting the new trade deals promoted by the Obama administration (they are concerned that these international deals would be violating US national sovereignty). In fact, it would be interesting to see how the mostly pro-business Republican leaders on Capitol Hill will respond to pressure from the Tea Partiers opposing trade legislation. That could be one of first tests of the ability of the more pragmatic Republican lawmakers - not many of those around - to stand up to the more radical Tea Partiers in their ranks.

The problem is that even these pragmatic Republicans (more of them in the Senate than in the House) are worried that opposing the Tea Party agenda could threaten their chances of getting re-elected as Republican Congressional candidates in 2012. The reason is that the Congressional primaries tend to be dominated by the more radical activists in the two major parties who tend to punish politicians who fail to exhibit ideological purity.

Moreover, if the early presidential primaries indicate that Ms Palin could emerge as a leading contender in the race, one could expect the Republicans on Capitol Hill to try to project a more right-wing and anti-Obama agenda that could threaten much of what will be left on the legislative agenda, including bipartisan efforts to reform immigration laws and to come up with some sort of a modest legislation to deal with climate change.

The Tea Party movement and the 'Palinists' are staunch opponents of any progress on these issues - reflecting their anti-immigration (mostly from Mexico and Central America) sentiments and climate-change 'denialism'. These proposals don't blend with the kind of policy tea they sip.

But some Democrats and a few Republicans remain hopeful that reason will eventually prevail on both sides and that the White House and the Congressional Republicans would succeed in reaching a few deals, even on economic policies and certainly on trade and foreign policy and national security, including the expansion of the war in Afghanistan. Ironically, some progressive Democrats and Republican Tea Partiers agree on the need to cut the defence budget.

In any case, perhaps we could get a sense of the shape of things to come in the last few days of the lame-duck session of the current Congress lawmakers will have to make two important decisions. Congress has yet to complete work on a spending bill to keep the discretionary budget of the government funded into next year. It is currently operating under a Continuing Resolution - a bill that funds the federal government under last year's levels until it expires - until Dec 3.

If they want to avoid a shutdown of the federal government after that date, lawmakers will have to decide between a spending bill (unlikely) or another Continuing Resolution that will fund the government into next year.

And then there is the question of whether to extend the Bush-era tax cuts that expire in December. The White House and the Democrats want to extend tax cuts only to families making less than US$250,000 a year while the Republicans insist on across-the-board extension.

One of the compromise proposals is to extend the tax cuts for another year or two. Another idea is to extend the tax cuts to those making less than US$1 million.

So if Congress doesn't extend the tax cuts (risking stalling economic recovery) or doesn't pass a Continuing Resolution (risking a government shutdown) before the end of the year, the chances for getting any serious legislative work done in the next two years falls to zero.

If the Democrats and the Republicans are able to make deals on these two issues before the recess this year, then the chances for avoiding a total gridlock in Washington next year rise - just a bit - above zero.


Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

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