Obama needs to regain credibility

04.10.10 Publication:

As Barack Obama gets down to the serious task of campaigning for Democratic Party candidates in an effort to stem his party’s losses in America’s mid-term congressional elections on November 2nd, it is time to think about what once seemed inconceivable: that he could end up as a one-term president, like Jimmy Carter in 1976-80, and one like Carter who is considered a failure. This is still not probable, and there will be a lot of political ups and downs between now and the 2012 presidential election. But what is already clear is that those two years will be dominated by a sustained and possibly desperate effort to avoid the humiliation of defeat. That effort will shape both domestic and foreign policy, and so will affect the world.

For a man who saw himself, and was seen around the world, as a transformational president, this is itself a remarkable transformation. At home, he has achieved two of the major goals he set himself: reforming health-care to provide near-universal coverage and reforming financial regulation to make a future crisis less likely. Yet he is widely reviled for the first, and given little credit for the second. At present, those big achievements are acting as a weakness, not a strength. And everything he does or says is overshadowed by the economy: recovery is under way, and has so far been steadier and stronger than in most of Europe but unemployment remains stubbornly and historically high, at 9.6% of the labour force. The federal budget deficit of X% of GDP, which reflects Obama’s big fiscal stimulus package last year, acts as a condemnation: with joblessness still high, the stimulus is thought of as a costly failure rather than as a measure without which things would have been far worse.

In foreign policy, the early global view that he would be a new type of American president has been replaced by disillusionment. Of course, Obama remains the world leader everyone wants a phone call from or a photo alongside. But America’s allies increasingly seem to feel that he has yet to show he can take an effective grip on the biggest challenges, in the Middle East, Iran and Afghanistan, and that he has contributed nothing on climate change. America’s foes show no fear of snubbing or angering him.

Is this barrage of criticism fair? In a sense, Obama’s personal approval ratings in opinion polls belie this negative litany: his score, hovering around 45%, is not much different to that faced by Ronald Reagan in 1982 and is better than that of Bill Clinton in 1994, a moment when both those ultimately two-term presidents encountered severe setbacks in congressional elections. The worry for Obama, however, is that while he is still liked by the public as a person, the policies for which he stands are not, especially health-care reform, the budget deficit and the war in Afghanistan. If, as looks likely, his Republican opponents take control of Congress in November, they will increasingly control his agenda too, and the risk is that they will then be able to focus attention on the policies for which he is unpopular. If so, his current quite steady approval ratings may simply reflect the fact that as yet there is no clear Republican candidate for 2012. Once one emerges, the polls may change.

Even against such a background, defeat in 2012 is far from inevitable, as the records of Reagan and Clinton show. Reagan benefited from economic recovery and a strong foreign policy, while Clinton succeeded in turning Republican obstructionism in Congress to his own electoral advantage. Barack Obama has not, so far, succeeded in converting his communication brilliance of the 2008 campaign into a way to communicate with the American people as president: he comes across more as a university professor than as the sort of wise friend that Reagan and Clinton were able to be. With economic recovery, and perhaps the benefit like Clinton of over-zealous Republican opponents in Congress, he could still turn things round. But it is going to be tough.

Nothing is sure in electoral politics, especially over a period as long as two years. What can be predicted, however, is how domestic and foreign policies are likely to be affected.

The effects will be intertwined. On September 29th, the House of Representatives passed a law designed to allow the American government to punish China for manipulating its currency and thus for allegedly under-pricing its exports, a law which will now pass to the Senate for consideration. On October 15th, the US Treasury is due to publish its six-monthly report into whether America’s trading partners—which basically means China—are manipulating their currencies. Protectionist sentiment is rising, and the ability of the White House and the Treasury to resist it is weakening.

That is happening ahead of the congressional elections. After a heavy Republican defeat, the White House is likely to follow the protectionist drumbeat in Obama’s own party and in the trade unions, and will take action against China. This will lift the issue of currency manipulation and trade imbalances out of the economists’ conferences and on to the political agenda, all around the world.

This will put China and America on to a collision course, a course that could be exacerbated by disputes over China’s support for the North Korean regime, for example, or over territorial claims in the South China Sea. What is unclear is where Europe would stand, since it is lamenting its rising euro but celebrating Germany’s strong exports to China. Another foreign policy worry will be that President Obama might do what Europeans talk about doing but dread America itself doing: he might withdraw precipitately from Afghanistan, to win points in the opinion polls.

Two other domestic issues will also frame the fight for the White House. One will be Republican efforts to repeal Obama’s health-care reforms, challenging him to veto the repeal despite the reforms’ unpopularity. The other will be the related tussle over the budget deficit, as each side tries to paint the other as a reckless spender or unfair tax-cutter.

It will not be a pretty sight. In fact, it risks making Europe’s battles over austerity plans and bank rescues look like a children’s party.