Friday, September 4, 2009

The fate of Obama's presidency

It hinges on the economy, which is slowly recovering, and Afghanistan, which is fatefully resembling Vietnam.

Two issues in national politics determine the fate of presidencies: the state of the national economy and the status of overseas wars. Thus, although media attention presently centers on President Obama's scheduled speech next week to the Congress regarding his endangered health-care initiative, his administration's future — and that of congressional candidates, in both parties, running in 2010 elections — will depend far more greatly on the economic and foreign-policy fundamentals.

First, a brief word about the health-care issue. Obama, quite late in the game, seems to have realized that he can no longer remain a spectator in the formulation of a final health-reform plan, leaving it to Democratic congressional chairs to shape. He is reported to be preparing a definitive statement for his congressional appearance in which he will spell out exactly those provisions he wants enacted in 2009.

Turmoil will follow. Congressional Democrats, in particular, will be enraged if Obama drops the so-called "public option," which would create a public health-insurance plan to compete with private plans. But, in the end, some kind of legislation can be passed this year labeled "health-care reform." It probably will involve marginal insurance-market changes.

Now to the Big Two issues.

Despite the recent upward surge in the Dow index, the outlook for financial and economic recovery remains cloudy. Some indices point upward. But medium-sized and small banks keep going under, including in this region — not because of exotic derivatives but because bread-and-butter construction and business loans have gone bad in regions hard hit by the recession.

Meantime, public debt keeps mounting as a result of the financial and auto-industry bailouts, the stimulus package, and the cost of continuing interventions in Iraq and Afghanistan. The Federal Reserve, not wanting to quash recovery, will continue its present easy monetary policy. But, down the road, the accumulating debt will lead to inflation and the Fed will have to tighten.

The consensus view among economists, which seems the correct one at this point, is that financial/economic recovery will come gradually over the remainder of this year and in 2010. Unemployment rates will remain high, however, and probably not begin to come noticeably down until late next year (when, coincidentally, off-year elections will be held). Fed tightening is unlikely to take place until sometime in 2011.

Now, about those offshore wars. Former University of Washington President Bill Gerberding circulated to friends last week a memorandum questioning whether the U.S. involvement in Afghanistan was beginning to resemble that in Vietnam. The Seattle Times, living on the financial edge, decided to spend money to send reporter Hal Bernton to Afghanistan for two months to give local readers first-hand coverage of the war there. These are local expressions of growing national concern about Afghanistan.

A broad national poll at the beginning of this week showed that most Democrats already have turned against the Afghanistan commitment, which Obama has said was necessary, while independent voters are trending that way. Only Republicans continue to give strong majority support to the U.S. effort there. (This creates an irony. Obama draws Democrats-only support for his health-reform legislation, while he draws mainly GOP support for his commitment to Afghanistan.) Even while national media coverage focuses on health-care reform and the economy, Afghanistan coverage is beginning to equal it — especially in the wake of the disputed and chaotic recent national election there.

Reportedly, a debate is taking place within the Obama administration about Afghanistan policy from this point forward. Vice President Joe Biden is said to be arguing for an exit strategy tied to a deal with the Taliban. At this point, State and Defense remain committed to staying the course toward the creation of a stable Afghanistan in which the Taliban and Al Qaida cannot regain an important foothold. Meantime, ground commanders keep requesting increased troop levels.

As Gerberding's memo pointed out, this is about where we were in Vietnam policy when President Johnson kept increasing U.S. troop levels in response to Pentagon requests for same.

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