Global Trends by Martin Khor

Monday 25 January 2010

Obama has to fight to save his policies

After a shocking defeat in a U.S. Senate safe seat, the Democrats look vulnerable and President Barrack Obama  has to change strategy and come back fighting if he is to salvage his policies, just one year after his historic inauguration. 


Last week the Democratic Party lost a “safe seat” in the United States Senate seat of Massachusetts, and suddenly Barrack Obama looks vulnerable, just a year after ecstatic scenes and soaring hopes at his inauguration as the first American black President.

The shock victory of the Republicans in the seat vacated by the death of the Democrat's most famous Senator, Teddy Kennedy, has sounded a wake up call for Obama.

Part of the reason for the Democrats' defeat was the party's over-confidence that it could easily retain   a seat it had held for decades.  While the party and its candidate Martha Coakley ran only a small campaign, the little known Republican candidate Scott Brown and his party fought a vigorous battle, that included the use of e-mails, advertisements and ground campaigning.

But this campaigning failure was only one factor.  The President and his party has become quite unpopular very fast. Obama's popularity has fallen from 68% last April to 50% today.

The reasons for this sudden shift in public opinion must now be the subject of Democratic introspection. The deterioration of the economy, and the perception that Obama has not done enough to counter this, is probably the main factor.

To be fair, the President has prevented the financial system from imploding, as the trillion-dollar bail-outs saved the banks and insurance companies, and the fiscal stimulus pulled the economy out from the brink of Depression.

But there are downsides to these policies.  Saving the financial institutions was too much of a success, to the extent that the big banks have obtained billions of dollars in profits and even billions more in bonuses to their executives.      

The government was seen to be too kind to the banks.  They had after all had caused the recession with their greed-inspired bad loans and toxic financial instruments, and the tax payers had to fork out hundreds of billions of dollars to save them from bankruptcy.  Now, a few months later, the same bankers were being paid millions of dollars each as a reward, instead of being sent to Detention Class with bread and water to teach them a lesson.

Obama's administration was perceived to be siding with the rich and the bad in Wall Street, while ordinary Americans were losing their jobs and houses, and savers were forced to earn near-zero interest on their deposits.    

Most importantly, the numbers of unemployed have jumped from 11.4 million in December 2008 to 15.3 million a year later.  Americans are obsessed with fear of losing their jobs. 

Obama should not be blamed for a recession he did not create and which he has helped to tame.  But he is being punished for getting his priorities wrong.  His energies were seen to be invested mainly in getting a health care bill passed in Congress, in a fight that has become bitter and in which his enemies have unfairly but effectively portrayed him as putting people's health at risk.

The ballooning of the government budget deficit, due to the stimulus packages and bank rescues, has also been blasted by his detractors, and increased public fear of unprecedented public debt that must be paid through higher taxes.

Meanwhile Obama has been seen to be soft to his opponents as he tried to win bi-partisan support for his policies.  But the Republicans spurned his efforts to accommodate them, and voted en bloc in Congress against his and the Democrats' policies.

The results of the defeat in Massachusetts are far reaching. The Democrats now have 59 seats in the Senate, one less than the 60 needed to safely push through bills.  

Since the Republicans as a solid bloc are so ideologically opposed to bills initiated by the Democrats, the health care legislation that has almost been finalised in Congress is now threatened.  If it does not go through, or if the bill has to be so diluted to appease the Republicans, this would be a major blow as Obama had made it his top priority.

More ominously, the climate bill that was about to be put to a vote in the Senate may now have to be postponed, perhaps to next year, as there is such strong opposition to it by the Republicans.  It will be impossible for the Democrats to push a climate bill on top of a health care bill at the same time.

This delay in a climate bill will weaken the United States' ability to firmly commit to emission reductions at the climate change negotiations and this in turn will reduce the possibility of a final global climate deal, at a time when the climate negotiations are already facing many other difficulties.

A bigger problem is that many Congress seats are up for re-election in November, and the Democrats could lose many of them if the trend revealed by the Massachusetts vote continues.

Obama has to reconsider his strategies if he is to boost his and his party's sagging popularity.  He may continue to try to be nice to his opponents, or even extra nice, in an effort to salvage chances of getting his policies adopted in Congress.

But doing this may mean he will continue to be doubly hit – by his enemies that refuse to be won over, and by his supporters who are disenchanted by his compromised positions.

Or else he may instead come out fighting for his policies and be ready to be tough instead of being the nice guy.  The cool “No-Drama Obama” would then become the passionate fighter who not so long ago

inspired people with the campaign slogans “We are the change we have been waiting for” and “Yes we can.”

On 21 January, just days after the Massachusetts debacle, Obama came out swinging against the big banks, calling for limits to be placed on the size of banks and on their ability to take risks.  A week earlier, he had proposed a tax on 50 of the biggest banks to recoup any losses from the bailouts.  And he also proposed a consumer protection agency dealing with financial institutions, a move that is opposed by the industry.

“We're about to get into a big fight with the banks,” declared Obama.  We can expect to hear “fight” and “jobs” as the new favourite words as Obama changes tack to win back his supporters.

On 22 January, at a town-hall type session in a Cleveland suburb, the President “sounded unusually defiant, even fiery” and used the word “fight” over 20 times, according to a press report.

He vowed never to stop fighting for policies to restore home values, not to stop fighting to give kids the best education, and that “so long as I have some breath in me, I will not stop fighting for being back jobs here.”

Obama has clearly decided to go “populist” and to fight, rather than bow to his detractors.  Whether he can do that for all his policies or only a few, and whether he can succeed in a badly divided America, remains to be seen.