Obama on collision course with Congress

After years of denying that he would have the authority to introduce immigration reform without Congress, Obama has now changed his mind. He signed an executive order giving about 5 million illegal immigrants in the US the right to work.

His change of mind has raised eyebrows even amongst supporters of the move. Commentators have pointed out that Obama's decision is rash to say the least, given that some Republicans in the Congress have privately indicated to be ready to talk about immigration reform. Whilst Obama's executive order is a gift to the Democrats in the short term, in the long run it may well be Republicans who benefit most from it. Many of them recognised that increasing their vote share amongst Latinos was conditional on getting immigration reform passed. However, the Republican Party was deeply split on the issue. By introducing the reforms bypassing Congress, Obama has moved the issue out of the way.

Yet, deep reservations remain about the way in which Obama has temporarily solved the issue. First, as some commentators noted, executive orders were never supposed to be used to enact laws that affect millions of Americans. Those who point out that Obama has used this vehicle on fewer occasions than his predecessors are missing a point. The magnitude of immigration reform is something that would have stopped any other president from using executive order in this context.

On top of this, there is the temporal character of this reform. Obama might have solved a problem for some immigrants for now, but the executive order can be revoked by his successor and, given how his unilateral action has poisoned the atmosphere between Congress and President, any future compromise is now less likely than ever.

So, in the end, the legacy of Obama's decision is ambiguous. He managed to remove an obstacle to work for some people for about two years, but in all likelihood, equally closed off any avenue for future compromise with Congress. As before, Obama, who wanted to change all, has probably done more than any other president to cement the status quo.

Budget fight - round 2

The US treasury is taking in $100 billion dollars less every month than it spends and the national debt is pushing $16 trillion dollars. Yet President Obama has identified the main enemy of the American people: too little spending!

In his press conference he used the usual strong language that comes natural to him when he backed himself into a corner . Forget compromise and talk about consensus! He told Congress that if they don't raise the debt ceiling by end of February, nurses and firefighters will go unpaid.

What he didn't say is that he could have ensured that it is not nurses and firefighters but the bureaucrats in Washington who go unpaid. Yet this is a president who loves to spend money. More than $900 billion dollars went on bailing out car makers that are now producing too many cars for a vastly shrunken world market. The (second) stimulus which his government pushed through Congress in 2008 did not even make a blip in the unemployment figures for more than three years, yet wiped the triple A rating off the US treasury.

Perhaps we shouldn't be surprised about all this. Apart from his rhetorical skills, Obama had little to offer in the way of executive experience. And he appointed Timothy Geithner to the position of Secretary of State in the Treasury.

Sadly, in the end, the US taxpayer will have to foot the bill for a president who has shown little hesitation to spend money he does not have. As the fate of Gordon Brown has demonstrated, history wont be too kind with politicians who like spending other people's money.

Solidarity in action - why the highest earners pay more than enough

As the debate about spending and tax rises still rages in the US, it may be useful to have a quick look at the specific income tax rates that apply to working people. In Britain, the view is that US citizens pay far less income tax than we do. The US, so the story goes, is a low tax country.

If one looks at the marginal tax rates for individuals that apply to their taxable income, nothing could be further from the truth. The New York Times has helpfully published a graphic detailing the marginal tax rates and how they developed over time.

(you can find the graphic HERE)

The graph is revealing. Despite the incessant news about rich people avoiding tax, the tax rate for top earners in the US ($350k plus) is similar to that in the UK. The rate is 39.5 per cent. That is only 5.5 percentage points lower than the top marginal tax rate in the UK. In fact, it is only 0.5 percentage points more than the tax rate Labour had levied (40%) on the highest earners from 1997 to 2010.

On top of that, people working in the US of course also pay local taxes, which adds to the burden. This picture throws a different light on the argument that 'tax rises can pay down the debt' of the US or the UK. The fact is that the highest earners in either country already contribute about half of all income tax revenue. Their tax burden is already a multiple of what the lowest earners contribute to the treasury. That's solidarity in action.

Four more years but the shine has come off

So there it is. The people have spoken and they have handed another victory to Barack Obama. Whilst there was less enthusiasm for his re-election amongst many Americans, he eventually mustered enough energy to mobilise many of his original supporters to give him a second chance. And a second chance it is since neither has he achieved much of that which he spoke so eloquently of in 2008, nor has he fulfilled the hopes of so many of his countrymen.

The main narrative of this campaign was that it was a choice between two widely different visions of America. I beg to differ. Whilst the Obama campaign ran a vicious personal campaign against Romney, the Romney camp was careful to avoid shrill sounds and personal attacks. In fact, observers on the left of the political spectrum corroborated that when they spoke of a 'Chicago' campaign run by the Obama camp (Chicago politics is famous for the nasty vilification of your opponent and the spreading of 'halftruths' or outright lies).

So as the shine has come off the Obama campaign, the Romney camp seems to have mainly articulated a moderate vision of America that widely commanded respect amongst independents. Romney's address to his supporters reflected this gracious and fair attitude in the political struggle, while Obama's speech to his supporters seems to have been mainly a repeat of the hollow phrases and high flying rhetoric from 2008.

Yet the media distortion about Romney and his supporters goes even further than that. The media suggested repeatedly that there were major differences between the opponents. This is largely wishful thinking. Take the reform of the banking sector and the effect of Wall Street on the US economy. Obama had strong words of criticism for Wall Street and the investment banks in 2008 yet failed to deliver a single effective reform package that would prevent a similar breakdown of the banking system.

Or look at the bailout of the car industry. Whilst this clearly won Obama plaudits from the car makers and their unions, the money mostly went to pay enormous pension liabilities that had built up over decades. This only achieved one thing: the American car industry is back to square one. It remains largely uncompetitive vis-a-vis foreign car makers and technological innovation is low. Obama may have saved it temporarily from going to the wall, but it is still heading for a crash, bailout or no bailout.

The most important weakness of all may however be Obama's personality. In an insightful documentary Andrew Marr spoke to close advisors of the President and they indicated that, despite the rhetoric about collaboration, Obama is not somebody who knows how to work together with others. He (perhaps too much) relies on his intellectual strength and believes that by simply thinking hard about a problem, he will come up with the right answer. This showed throughout his presidency. As some of his supporters argued, Obama may be the most lonely president ever, unable to reach out to colleagues and work with them to achieve robust solutions to difficult problems. This contrasts markedly with Romney who as governor favoured a managerial style, often delegating problems to capable staff and colleagues.

And so, I suspect, we will see more of the same. A president increasingly frustrated by an allegedly intransigent 'Washington' political system and hemmed in by an inability to reach out to others. What Obama does not seem to understand is that rational thought may sometimes be a poor guide for political decision making. Politics is about people, not abstract ideas.