Monday, December 27, 2010

Can Obama prove to be the Comeback Kid?

Business Times - 28 Dec 2010


Can Obama prove to be the Comeback Kid?

It all depends on the pace of economic recovery and how fast unemployment rate drops

By LEON HADAR
WASHINGTON CORRESPONDENT

AFTER US President Barack Obama and the Democrats had taken a 'shellacking' in the midterm congressional and gubernatorial elections in November, and the White House occupant's approval rating dipped to under-50 per cent, the media were starting to portray Mr Obama as a 'has been', a one-term failed president a la Jimmy Carter. It was nice knowing you, Barack.

Well, that was three or four weeks ago. Bye, bye the Old Narrative. And hello the new one: Obama, the Comeback Kid.

Indeed, Mr Obama seemed to have had a very successful December: Congress approved a spending and tax cut bill that amounted to a new economic stimulus package, and notwithstanding some Republican opposition, US lawmakers voted to repeal a controversial 'don't ask, don't tell' policy regarding openly homosexual members of military and the Senate ended up ratifying the New Strategic Arms Reduction Treaty (Start) with Moscow that will bring the total number of deployed US and Russian nuclear warheads down by 30 per cent from 2012. And, hey, there are even a few encouraging sings that perhaps the American economy is also coming back.

So it is not surprising that with these much-needed wins for Mr Obama at the end of a lousy political year for him and his party, columnists, television pundits and bloggers were predicting that Mr Obama's 'comeback' was already under way, and comparing him not to president Cater but to president Bill Clinton who after the Democrats' 1994 midterm defeat launched a dramatic political resurgence that led to his re-election two years later. In fact, it took Mr Clinton several months and several legislative victories before the media started celebrating him as the 'comeback kid'. Mr Obama's comeback was quite speedy in comparison.

Mr Obama's 'comeback is already a year ahead of Clinton's' and his re-election was 'more likely than not', according to Charles Krauthammer, a conservative columnist and a regular Obama basher. And after a Dec 20 CNN poll had given Mr Obama close to 50 per cent approval rating, Washington's premier political publication, Politic, suggested that 'President Barack Obama may be staging a comeback in the eyes of the American people' while a headline in USA Today read, 'Political Rebound? Obama sets up as new Comeback Kid'.

Mr Obama, who was celebrating his victories in a series of public events and press conferences, was clearly in a cheerful mood and was back to his usual self, even sounding a bit cocky at times. Gone was the post-shellacking shell-shocked Mr Obama.

The conventional wisdom in Washington is that Mr Obama will be able to sustain his political momentum going to his State of the Union address in February. Maybe - or maybe not. After all, December's legislative successes were made possible by a 'lame-duck' Congress in which the Democrats controlled both the Senate and the House of Representatives.

The House will be run now by a Republican majority in the next year, and while the Democrats will continue to be in charge of the Senate, a larger number of Republican Senators working together with a group of conservative Democrats will be in a position to make it quite difficult for Mr Obama to win support for any ambitious legislative agenda.

In fact, the recent legislative victories by Mr Obama should be seen more as a reflection of the interests and the sentiments of a centrist political consensus and less as a sign that Congress and the American people are ready to back the kind of 'change' that many Democrats espouse.

Indeed, unlike the large economic stimulus package and the healthcare reform bill that Congress had passed last year - and that were opposed by almost all the Republican lawmakers and were unpopular among majority of Americans - the three major pieces of legislation that were approved during the last days of the lame-duck Congress enjoyed bipartisan support and strong public approval.

Many Democrats were opposed to the decision by the White House to support the extension of the Bush era tax cuts to wealthy Americans in exchange for Republican backing for more government spending measures. At the same time, the New Start accord whose origins go back to a nuclear arms reduction process - and that had been commenced by former Republican president Ronald Reagan - was backed by all the members of the Republican foreign policy establishment, including former Republican president George H W Bush and former secretary of state Henry Kissinger - as well as by the military and civilian leaders in the Pentagon. That the Senate ratified this accord by a 71 to 26 vote was therefore not a huge surprise.

And while the decision by a majority in Congress to allow gays and lesbians to serve openly in the military - it passed the Senate 65-32 and the House 250-175 - was clearly historic, the fact is that it was not as controversial as it would have been, say, 10 years ago. A majority of Americans support the move, reflecting rising acceptance of homosexuals in society, and that quite a few Republicans voted in favour of the abolishing the old policy suggests that the ability of social conservatives to determine the Republican Party's policies is limited, not unlike the situation in the Democratic Party where the members of the left-leaning progressive wing of the Democratic Party will probably not be able to set its agenda in the coming years.

In a way, whether Mr Obama will succeed in continuing to do the Comeback-Kid routine will depend very much on his willingness and skill in governing from the political centre - and the readiness of the Republican leaders in Congress to work with him. Mr Obama and his aides insist that he has never been an ideologue and that even his healthcare reform plan and the decision to apply aggressive fiscal measures to stimulate the economy reflected his centrist political instincts.

It's the Republicans who have been shifting to the extreme political right that has made it difficult to pursue a bipartisan set of policies in the last two years, argue White House officials and centrist Democrats.

And the question remains whether the Congressional Republicans, including a large contingency of Tea Partiers, will be inclined to adopt a strategy aimed at ensuring that Mr Obama doesn't get re-elected in 2012 by opposing all his proposals, including an expected plan to cut the deficit and change the tax code. Or is there a chance that the White House and the Republicans try to reach a common ground in the way they had done this month.

But whether Mr Obama really succeeds in coming back will depend more than anything else on the pace of the economic recovery and, in particular, on whether the current high unemployment rate of close to 10 per cent starts dropping. There are, indeed, some signs that the US economy is starting to gain some strength, including a rise in retail sales, industrial production and factory orders.

In fact, one of reasons that some investors have become more bullish on the American economy has been the recent agreement between the White House and the Republicans to extend tax cuts and stimulate the economy. That together with the Federal Reserve's activist monetary policy as well as the improving relationship between the White House and Corporate America seemed to have raised the level of optimism in Wall Street regarding the prospects of economic growth in 2011.

But the mood in Main Street will probably not improve as long as unemployment remains high. And if the White House and the Republicans are not able to work together to grow the economy, expect Wall Street to lose its optimism. So don't be shocked if the current Comeback-Kid political narrative will become passe sometime next year.


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