Damage to Obama and US may be irreparable

WE WILL know by today whether the House and Senate are willing to pass the debt ceiling deal that was concluded on Sunday night.

But assuming US president Barack Obama signs the last-minute legislation into law by the 11.59pm deadline set by the US treasury, the damage to Obama’s reputation and to faith in the ability of the US to lead a global economic recovery may be irreparable.

Throughout the crisis, Obama was strangely passive. It was US vice-president Joe Biden who stepped in on Saturday to spar with his cranky former Senate colleague, Mitch McConnell of Kentucky. And it was Biden, again, who went to Capitol Hill yesterday to meet the Senate and House Democratic caucuses in the hope of persuading them to vote for the debt deal.

Obama’s most valuable asset is his “bully pulpit” – the opportunity to use his authority as the country’s highest elected official to persuade US citizens of the rightness of his policies.

Yet with the exception of a brief foray to a sympathetic audience at the University of Maryland on July 22nd, the president hunkered down in the White House through the last weeks of the debt ceiling crisis, rehashing the same points in speeches and defending his attachment to “a balanced approach” (a euphemism for tax increases for the rich) even after he had surrendered to the Republicans’ cuts-only ultimatum.

By Obama’s own admission, he lives in a “bubble”. Western embassies, US journalists and congressmen all complain of the insularity of the Obama White House. Whether through arrogance, fear of criticism or ineptitude, this White House seems unable to communicate effectively.

Throughout the debt ceiling debate, Republican leaders lied, and Obama let them get away with it. The president wanted “a blank cheque”, we heard, ad nauseum, from Republicans.

Obama could have pointed out that Congress – not the president – passes the budget in which every penny of government spending is accounted for.

The Republicans kept criticising Obama for failing to offer his own plan, conveniently forgetting that in April he proposed a $4 trillion (€2.8 trillion), 12-year deficit cutting plan, which would have slashed $3 in spending for every $1 in tax increases.

It was awkward for Obama to point to his own plan, because from the beginning he was ceding ground. Initially, he said lifting the debt ceiling must not be tied to deficit reduction. He caved in, which is why the economy will now be subjected to trillions of dollars in cuts which most economists agree will undermine the already faltering recovery.

Until last week, Obama insisted that the US’s wealthiest citizens and corporations had to share some of the burden with the poor and middle classes. He lowered his 3:1 ratio of spending cuts to tax increases in April to 5:1 in July, before abandoning tax increases all together. The White House offers the lame hope that the “super committee” established by the debt deal may put tax increases back on the table.

Obama could have pointed out that the richest Americans are paying only 18 per cent income tax, and that taxation as a percentage of US GDP now stands at 15 per cent, the lowest level since the 1950s.

But instead of explaining to Americans why they need a solvent government, he seems to have accepted the Republicans’ premise that government is bad.

When Obama announced the debt deal on Sunday night, he boasted that “the result would be the lowest level of annual domestic spending since Dwight Eisenhower was president”.

With US infrastructure falling behind the developed world, is that really such a good thing? Obama didn’t have the courage to push through a sufficiently large stimulus plan before he lost the House in the November 2010 midterm elections. So he got the worst of both worlds: a timid recovery and burgeoning debt and deficits.

Averting a default and lifting the debt ceiling until 2013 were the only benefits Obama derived from Sunday night’s deal. “The rest of it is a nearly complete capitulation to the hostage-taking demands of Republican extremists,” the New York Times’s editorial said yesterday.

Nobel Prize-winning economist Paul Krugman called the deal “an abject surrender on the part of the president”. Democratic representative Emanuel Cleaver, a United Methodist minister, was an instant television and internet hit for saying the debt deal looks like a “Satan Sandwich” because “what you see is antithetical to everything the great religions of the world teach, which is take care of the poor, take care of the aged”.

Every time the intransigence of the Tea Party-dominated House has provoked a crisis – last December, last spring, and again this summer – Obama promised to “stop kicking the can down the road”. That is exactly what has happened, again.

The super committee created by the debt deal is supposed to identify $1.5 trillion in spending cuts by November 23rd. Congress will not be allowed to amend their plan, and will have one month to vote Yes or No.

The head of the Tea Party caucus, representative Michele Bachmann, said last week: “We’ve had 17 Rodney Dangerfield [after the late US comedian] committees on spending. Why not create another?”

Last December, the Bowles-Simpson commission, which Obama appointed, proposed $3.8 trillion in deficit cuts. Obama failed to adopt its findings, and the plan died. The only thing that is supposed to preclude the same fate for this super committee is a guillotine that will make automatic swingeing cuts in domestic spending if they fail.

It is small comfort to Obama that his erstwhile negotiating partner, speaker of the House John Boehner, also comes out of this crisis much weakened, after he failed to rally the far right of his own party.

The Tea Party extremists who drove the US to the brink of default were denounced as “hobbits” by Sen John McCain, as “suicide bombers” by others. Notwithstanding, as the country surveyed the smouldering detritus of the debt crisis yesterday, the Tea Party stood triumphant in the ashes.