In many respects, the first term hasn't fared as badly as it could have done. President Obama has managed to move the US away from its dependency upon Middle Eastern oil by developing new technologies that produce energy sources domestically. These methods, however, are likely to cause long term environmental damage, but they do provide a short term energy fix. The result of this is to make the Middle East less important to America today than it was four years ago. The depth of the on-going recession, which has placed the economy as the dominant issue in the US, combined with the lessening of the dependency upon Middle Eastern oil, allowed US troops in Iraq to be withdrawn in 2011, and will allow a draw down in Afghanistan in 2014.
The prospect of a peace dividend has allowed the potential re-balancing of federal spending away from the military and towards welfare - what we now know as Obamacare. This ought to make the care promises to the Boomer generation that more affordable towards the end of this decade. Another factor serves to strengthen this trend. Under the first term, the US use of high technology in military action - particulalrly in the use of drones - has rebalanced military operations away from direct intervention (which is very costly) and towards more modestly costing operations. The burden upon the federal purse is much lessened because of this. The final windfall from which President Obama has reaped benefits is, funnily enough, the recession itself. As the recession gripped the world economy, so funds moved away from high risk emerging economies and into relatively safe economies, such as the US. By a strange quirk of fate, this has lessened to importance of nations such as China in the purchase of US Federal bonds.
As we can see, although many may disagree, the long term health of the US is much better today than it was four years ago. Part of this is down to President Obama. Part of it is down to luck. And a good part of it is down to the hard work of countless American citizens. This does not necessarily mean that the immediate future will be quite so bright. There are a number of strategic long-term challenges that the second Obama administration will face.
We saw a foretaste of one of them in the final week of campaigning. Our weather patterns, right across the globe, are becoming more and more disrupted. The frequency of extreme weather events is increasing and the collateral damage they cause is increasing. America has not built up its resilience assets in the past few years, and this neglect may cause problems in the near future. In many respects, this results from the switch to the newer fossil fuel technologies and the relative neglect of the green fuel technologies. This is a long term problem that could be felt in the next few years.
The problem of the US Federal debt is one that has not gone away, and, if pundits are to be believed, will increase over the second Obama term. At present, it would appear that the policy towards the debt (note - the stock of debt, not the deficit, which is the rate at which the debt is increasing) is to rely upon a combination of growth and inflation. What happens if neither of these materialises? At some point, sooner or later, the US will have to address its debt situation, much as Europe has in recent years. One approach would be to refocus upon taxation, but this would be deeply unpopular, which another would be to restrict entitlements, again a deeply unpopular approach. It is not unreasonable to consider another financial crisis in the next Obama term if the bond markets become unconvinced by Obama's fiscal policy.
Much of the debt owed by the Federal government is held by non-US actors. This provides an interface with US foreign policy. In particular, one major creditor - China - is portrayed as a peer-to-peer competitor in foreign policy. This is a mistake. China wants nothing more than stability. A foreign policy that has a focus on the containment of China doesn't seem quite right. There is ample scope to make China more of a partner in Asia than a rival. If that is true of China, it is more so of Iran. A confrontational approach to Iran might not prove to be the best path for American foreign policy. If we look at the Iranian national ambition, it rarely boils down to more than an international acceptance of Iran as a regional power. Given the instability of the region, surely there is more scope to use Iran as a partner than a rival? Both of these foreign policy questions have not been adequately dealt with in the first Obama administration. He may not have this luxury in his second.
It is our view that the first Obama administration has more positive than negative for the long term prospects of the United States. Of course, we would never be able to convince the dogmatic extremists who oppose him of this, so perhaps our appeal may be better received outside of America. His second administration will face a number of long term challenges - climate change, a fiscal imbalance, and a challenge from Asia. It will be interesting to see how he deals with them as they arise because their resolution needs a different skill set to the one he has used to date. Does he have it in him? That is the key question for the next four years.
© The European Futures Observatory 2012