Thursday, 8 November 2012


 US President Barak Obama

Having secured a second term, and fought his last campaign, US President Barak Obama  is as free as a US President can get when it comes with what to do with his new mandate.  He may do more with his second term than he did with his first, having no special interest groups to soothe or cultivate for future electoral support – Bill Clinton was said to have accomplished more in his last 80 days in office than in the first term and most of the second term. President Obama won re-election at a time when US unemployment stands at 7.9%, no US President since Franklin D Roosevelt has won re-election with unemployment at that level.

A poor economic situation can be pretty terminal to an incumbent chance of getting back into the White House: George Bush Sr, Jimmy Carter, Gerald Ford and Herbert Hoover being good examples. Fortunately for the 44th President of the United States, the US economy appears to be slowly recovering from the worst economic depression since the Great Depression of the 1930’s. US unemployment has dropped but it remains relatively high, standing at 7.9%, and job recruitment remains a problem, with millions of unemployed Americans seeking work this remains a key issue.  US economic growth also still remains sluggish; it was 2% in the third quarter of 2012.

Managing the Tax base is also an important issue, as on January 1st, unless Congress steps up to the plate, a raft of tax rises and government spending cuts which will affect nearly every American (one way of another) and impact on the relatively weak economy will kick in. This is no accident waiting to happen, it is a result of the 2011 compromise between President Mr Obama and the Republican dominated Congress which happened because of the need to focus on cutting the vast US budget deficit over the next few years.

A potential Iranian crisis may loom on the horizon even as other US global commitments begin to wind down i.e. Afghanistan, Iraq, etc. The Israel/Palestine situation, the war on terror in general (and more specifically in the Yemen), efforts to retain US access to energy supplies and keeping the lid on nuclear proliferation all remain major issues. The USA remains committed to stopping Iran gaining nuclear weapons while Iran continues to state that its nuclear programme is solely for peaceful purposes, and it continues to resist economic sanctions. Fending off Hilary Clinton (a hawk when it comes to Iran) may also prove a challenge for the new President.

On the domestic front the ongoing problem with the enormous government healthcare programme for over-65s and disabled Americans - known as Medicare or the third (lethal) rail of US politics - has been projected to run out of money in 2024 and may become 3.4% of GDP by 2035.  The programme (almost 50 years old) and one the Democrats' significant achievements, is under two pressure from the increasing cost of an inefficient healthcare system and the rapidly approaching retirement dates of the baby-boom generation, growing numbers of whom are increasingly eligible for benefits.

The President if he is unlucky may also find himself facing domestic legislative gridlock having to deal with a bitterly divided congress. Admittedly this is no new situation as President Obama has had to deal with it for last four years. As has been noted elsewhere a bipartisan approach would be nice and sounds good but the reality is that the political parties within the gridlocked legislature have barely looked beyond their deeply entrenched partisan positions.

There is no sign soon that Congress will cease to be divided, as the Republicans remain in control of the House of Representatives and the Democrats have maintained their exceptionally narrow (and occasionally a single-vote) majority in the US Senate. So in the short term, the Republicans (some of whom have serious personal issues with the President)  control the House and can secure enough vote in the Senate to stall any legislation, will be no more willing to compromise with the President and the Democrats in his second term that they were in his first term.

Now may also be the time for the President to revisit the banks and the problem of tax evasion.  Back in January (2009) President Obama announced two more than reasonable measures to curb the banks, the first aimed to stop banks from engaging in proprietary trading, private equity, or any other activity for their own profit unrelated to serving customers. The second measure aimed to take further steps to limit the balance sheet size of banks so that they cannot in future acquire “too big to fail” status.

The President was absolutely right to characterise his proposals as a victory for common sense and while we still have some way to go before the banks are forced to act responsibly, the first steps were undertaken. David Cameron and the Tories (despite everything that has happened in an almost unregulated, greed driven finance sector over the last few years) are still far to enamoured with their friends, the dodgy money men in the City of London.

We also need to a degree of similar rules for financial institutions across the globe, off shore must become a matter of historical record – there must be no where the financial institutions can hide and no more endless threats of taking their “ball” (businesses operations) elsewhere and relocating because they have lost their so called special status. It is important to remember, that no one, not even bankers (or MPs) are above the law and no one is above financial regulation and scrutiny.

President Roosevelt and William Jennings Bryan had a valid point - if you believe in the ‘free market’ (and the City money men claim to) then no organisation can be too big to be allowed not to fail. Basically if you claim to live by the free market then you can die by it too. The massive public subsidies effectively made some of the banks 'publicly owned’, yet they are still largely run by bankers who are so thick skinned or self interested that they carried on regardless when it came to the awarding of bonuses - would that they had been more generous when it come to advancing loans to small to medium sized and large businesses in their hour of need.

It’s also time to tackle tax evasion on a global scale because it is a global industry. The OCED estimated that some $10 trillion dollars worth of private wealth (in 2010) is hidden away in Paradis Fiscaux (tax havens). These financial dead letter drops are used by banks, multi-national companies, corporations, the super (and not so super) rich, drug dealers, dictators, terrorists, fraudsters and other criminals who use them to hide and launder their wealth. One side effect of Paradis Fiscaux is that they enable people and organisations to avoid paying their fair dues to the society in which they live, unlike the rest of us.

To put things in perspective - the $10 trillion dollar figure produced by the OCED means that the lost taxation normally accused would be more than double the entire planet's global aid budget. Gordon Brown (remember him?) waffled when it came to tax evasion, as have the Con Dems as they are in the pockets of the money men in the City or under the influence of Lord Ashcroft - who's heart may be in Belize with his wallet? President Obama, President Sarkozy and Chancellor Merkel are all on record when it comes to saying that off-shore capital needs to be properly regulated – so now may be the time for action.

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