Despite the euphoria he engenders, Obama faces many challenges
BARACK OBAMA ALREADY FACES one significant potential problem: his current exceptional level of personal popularity – above all, globally. It’s virtually impossible to see how that could possibly be as high – never mind even higher – in, say, 12 to 18 months’ time than it is now.
But if Obama’s personal standing can hardly go further up it can – and at some time certainly will – decline appreciably. That’s politics – at least when you head to the White House with the greatest expectations on any President-elect since John Kennedy won the 1960 election.
Key fact is that it’s hugely easier to be idolised before you have taken any executive decisions than once that often-painful process has begun. For Obama the most immediate challenge will come from economics – more specifically, what trade policy the United States follows under his leadership.
I noted in this column, way before the US presidential campaign had even got formally under way, that the Democratic Party had largely been captured by strong protectionist interests. That was dramatically confirmed in what proved in hindsight to be the true fight for the White House – the vicious struggle for the Democratic Party presidential nomination between Obama and Senator Hillary Clinton.
Both contenders slugged it out to dispute, among other matters, who would be the “toughest on foreigners” in trade affairs and who would be the most “supportive” of US workers threatened by external competition.
True, Obama eased back a little on that matter once he’d won the nomination. Some of his personal economics team – notably Jason Furman and Austan Goolsbee – have always been on the free trade side. They were quick to offer assurances that some of Obama’s earlier most hard-line views – particularly his threat to pull the US out of the North America Free Trade Area (Nafta) – had been nothing more than campaign rhetoric.
But that’s part of the current difficulty with Obama. For all his undoubted abilities, including magnetic oratory and his place in history as the first black US President, many uncertainties remain.
That’s why many countries, including South Africa, are already urging Obama to give practical demonstrations of a clear commitment to trade freedom. However, there are many complexities flowing from that.
For starters, any president has far less power in determining US economic policies – unlike, but critically, foreign policy – than is widely assumed. Here Congress – the Senate and the House of Representatives – hold ultimate authority.
The Democrats now comfortably control both arms of Congress. Protectionism is therefore very much in the ascendancy in the US. So even if Obama effectively promises foreign listeners to abandon a lot of his previous core anti-trade attitudes – and that’s still a big if – there’s no guarantee whatever that he’ll be able to take Congress with him.
That’s very different to the situation that confronted former Democrat President Bill Clinton after his party lost control of both the Senate and the House in 1994. Clinton could then rely on enough Republicans and a smaller number of Democrats to make some substantial progress on Nafta and other trade-promoting initiatives.
But Obama won’t enter the White House in that situation. Protectionist Democrats – some admittedly mindful of the severe perils already facing the world’s economy – are now broadly in charge.
Obama is bound to appoint to his cabinet some trade critics from the Clinton administration. Among former senior Clinton leaders he’s met in recent days are two who were always classed as “trade sceptics” – former chief economic adviser Laura Tyson and ex-Labour Secretary Robert Reich.
On the surface that seemed countered by the suggestions that Larry Summers, exTreasury Secretary, might again be taking up that post.
But Summers – as Nobel economics laureate Paul Krugman – has been much less enthusiastic about free trade in recent years than was long the case.
Ironically, Summers warned when he was in the Clinton cabinet that unless Western Europe and Asia helped the US to reduce its enormous and mounting trade deficit that would inevitably fuel protectionist demands in the US. He now seems to confirm the accuracy of his own forecast.
But whoever serves in the new Democrat administration – and whatever happens with Congress – the world will shake angry fingers at Obama if the US does move to more protectionist policies.
Then – particularly if, as promised, Obama also pushes Western Europe for much more active participation in the war in Afghanistan – the new President’s global popularity will come well off the boil.
However, that won’t be Obama’s primary concern. His emphasis will rather be on bolstering the US economy, restoring confidence in the low- and middle-income housing market, promoting employment – and getting re-elected in 2012.