Global Economic Crisis

The so-called fiscal cliff, a creation of Washington politicians, means that a tsunami of tax increases and spending cuts will batter the American economy, due to, among other things, the expiration of the Bush tax cuts. As the United States is still coping with a severe economic  crisis, and depends on structural mega-deficits to keep its economy afloat, the fiscal cliff threatens to derail for what passes for an economic recovery-one that is feeble at best.

The hope of forestalling a major fiscal drag on a weak American economy is a compromise involving increased revenue generation combined with selective spending cuts. But the Republicans, who control the House of Representatives, and the Democrats, who control the White House and the Senate, thus far are unable to compromise. Thus, global markets watch in stupefied wonder as the American political establishment morphs into a circular firing squad, as witnessed with the latest shenanigan.

House speaker John Boehner boasted that his GOP caucus would pass his so-called “Plan B,” which offered feeble tax increases along with far more massive social spending cuts, while leaving military spending increases intact. However, even a token tax increase limited to only those earning more than one million dollars per annum, was more than the Tea Party stalwarts of the GOP could stomach. Instead of a vote, Boehner embarrassingly withdrew his own “Plan B,” and in the process turned what passes for the modern-day Republican Party into a laughing stock. Meanwhile, America’s creditors watch nervously, as the political games in Washington continue undiminished, while thoughtful economic policy takes a back seat to ideological priorities.

Amid tepid economic growth that can only be maintained by massive  fiscal deficits, the political establishment in Washington DC, especially within the GOP, is looking increasingly dysfunctional to a world in which  America’s economic dominance is likely to be surpassed by the new emerging economic giants, China and India, perhaps within the next 10-20 years. Unless a moment of sanity can prevail in Washington, whereby economic policy is crafted by real economists instead of fringe ideological movements, the fiscal cliff that will ensue will contribute significantly towards the permanent economic decline of the United States.

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Over that past century, only four elected U.S. presidents have failed to win a second term in office. America’s 27th president, William Taft, succumbed to an insurgent challenge from his White House predecessor, Theodore Roosevelt, whose third party candidacy  doomed Taft to defeat at the hands of Woodrow Wilson. The three other single term elected presidents of the past 100 years were victims of economic crises; Herbert Hoover, Jimmy Carter and George H. Bush. Gerald Ford, the unelected successor to Richard Nixon, is an anomaly in U.S.. political history, being in effect Nixon’s surrogate and taking the heat for the Watergate scandal.

Will Barack Obama be fated to join the ranks of the one-timers? Though there remain nearly two years until the next presidential election, the prognosis on Obama is becoming increasingly guarded. Absent a severe economic or political crisis, an incumbent president seeking a second term normally enjoys an unassailable advantage over his opponent. Even amid the unpopularity of the Iraq war, George W. Bush was still able to convincingly defeat his Democratic Party challenger in the 2004 presidential contest, Senator John Kerry. However, unless a miraculous economic turnaround occurs, President Obama is likely to enter the 2012 presidential campaign  with baggage which may leave him highly vulnerable to a strong challenger from the GOP.

Almost all serious economic forecasts project that America will still be experiencing historically high levels of unemployment in 2012. The Republican Party’s midterm election triumph, in particular regaining control of the House of Representatives, points to the acute vulnerability Obama’s reelection campaign will face. In addition, the themes that generated excitement  in 2008 for Obama’s candidacy, such as “change you can believe in,” will not be credible factors in 2012, leaving him as the incumbent forced to defend a questionable record in managing the economy, and any defensive posture is unlikely to elicit a memorable theme that will excite the Democratic Party’s base and attract independent voters, the latter category crucial for any presidential candidate. In contrast, we are already seeing convincing evidence that the GOP will have an effective grass-roots movement that is excited and motivated by the prospect of ending  the Obama presidency in 2012, as evidenced by the phenomenon of the Tea Party.

As dismal a factor as the economy is likely to be in calculating the odds of Barack Obama winning a second term, there are other elements that weaken the prospects of his winning a second term. The unending war in Afghanistan  is rapidly being transformed into Obama’s version of the Iraq debacle, with a growing proportion of the electorate losing faith in this costly overseas commitment that has become the center of gravity for Obama’s war on terror. The continuing war and perception that President Obama has compromised too easily with his Republican congressional opponents has estranged  some of his supporters within the progressive wing of the Democratic Party. It is not inconceivable that Obama will face a Democratic challenger when he seeks re-nomination  as the Party’s presidential candidate in 2012.  Should that happen, the odds still favor Obama being the Democratic presidential nominee in 2012, however a divisive primary battle would further weaken the 44th president’s odds of winning a second term in the White House.

Increasingly, there is talk within Democratic Party circles regarding the steep challenge and mounting obstacles Barack Obama will face in campaigning in 2012 for a second term as president. Among these doomsayers there remains one hope; that the Republican Party will nominate Sarah Palin as its presidential candidate in 2012.  Looking at Palin’s current level of high negative poll numbers, they see her as a potential gift from Saint Jude, the patron saint of desperate causes. However, as former Labor Secretary  Robert Reich pointed out in a recent blog in the Huffington Post ( “Sarah Palin’s Presidential Strategy, and the Economy She Depends On”  ), Palin may be a far more formidable challenger to Barack Obama than Democratic strategists  recognize, especially if America’s economic woes persist.

Though undoubtedly campaigning in 2008 with the noblest of intentions, it is looking increasingly likely that Barack Obama will enter the history books as not only a one-term president, but also a valiant but deeply flawed failure.