Impasse biggest challenge in an Obama second term

Jobless figures leading into the presidential election are seen as a key factor in the result. Photo / AP

Is there still any possibility - any hope at all - of a bipartisan future in US politics? Back in 2008 this was Barack Obama's big dream, the notion that he would somehow, miraculously, bridge the yawning chasm between Democrats and Republicans and bring both sides together to advance policy and mend America.

But Obama's hopes for a post-partisan Washington, "beyond the bitterness and pettiness and anger", proved a spectacular failure. With two months to election day, partisanship is brutal as Obama and his Republican challenger Mitt Romney slug it out on the campaign trail amid a blitzkrieg of attack ads.

Four years ago Obama tailed John McCain by 5 points in a September Gallup poll then surged ahead. Few expect that to happen this year.

"He's not going to achieve the kind of victory he had in 2008," says Mark Schmitt, Senior Fellow at the Roosevelt Institute. "There's no way to get that sense of optimism."

Giddy optimism proved no match for political reality. Obama struggled to lead as America reeled before a perfect storm of housing collapses, banking failures and soaring unemployment, while two unpopular wars bled treasure and prestige. Instead of leading the US into a brave new world Obama battled political stalemate.

Democrats blame an obstructionist GOP, hell bent on thwarting Obama. Republicans paint Obama as aloof, an ultra-liberal.

"From Day One they weren't going to co-operate on any major issue," David Axelrod, Obama's top strategist, told the Washington Post. Senate Minority Leader Mitch McConnell insists Obama wanted to "move the country to the left". The rift widened when the GOP right won the House of Representatives in 2010.

Nonetheless, Obama pushed through the Affordable Care Act, extending health care to millions, a goal that has eluded presidents since Theodore Roosevelt in 1912. Obama withdrew US troops from Iraq and is on track to exit Afghanistan. The ban on gays openly serving in the military ended. He bailed out the auto industry; General Motors roared back in 2011 with the most profitable year in its history. He opened the door for children of illegal immigrants to obtain citizenship, a goal predecessors like George W. Bush sought in vain. And it was on his watch the US assassinated Osama bin Laden.

Obama's health care reform soaked up time and hardened partisanship. Other initiatives, such as a "smart" energy grid, were frustrated [although a natural gas boom has made the US more energy independent, curbing petrol prices and fuelling the economy], in part by the ongoing fiscal crisis after the US economy went into a tailspin in late 2007, with global cascade effects.

Economic reform - part of his "long game" in which "change is hard," alluded to by First Lady Michelle Obama in her convention speech - is crucial.

Yet bipartisan agreement is absent. In May, Obama blasted Republicans who "waged an all-out battle to delay, defund and dismantle Wall St reform" via the 2010 Dodd-Frank Act. The US$787 billion ($988 billion) stimulus, a mix of tax cuts, unemployment benefits and job creation grants cobbled together in 2009, averted disaster. But 8.3 per cent unemployment, and anaemic growth rate at 1.7 per cent in the second quarter of 2012, make Obama vulnerable.

This week Bill Clinton, who left a budget surplus in 2001, said Obama "inherited" a sick economy from the Bush Administration and stopped it getting worse. It was "unreasonable" to expect a full recovery in one term. Fundamental economic reform will take a second.

Jobs are key. What matters this week, says Larry Sabato, director of the Centre for Politics at the University of Virginia, is not the Democratic National Convention, but what happens when the monthly job figures appear. The final jobs report comes out on the Friday before the election.

It is a challenge that also shows the limitations of US power. In a global economy the US is interlinked with key blocs such as the European Union and China. Obama has urged the European Central Bank to stop the dominos falling.

If Obama wins he may still face obdurate Republicans in the House, expected to remain in GOP hands, and at best have a razor-thin edge in the Senate. But 60 seats are needed for a filibuster-proof majority.

Conventional wisdom for second-term presidents is that they secure their legacy. Re-election is not an option and, unworried about the base, presidents can shift to the centre. If Congress remains hostile Obama may push his agenda via Executive Orders, administrative regulations, vetoes and appointees.

Tackling climate change, dropped when Obama got bogged down in the health care fight, may re-emerge. A cap and trade law seems distant. But the stimulus seeded renewables and a regulatory approach, using the Environmental Protection Agency, which passed tougher vehicle fuel standards, may have heft.

Or Obama may focus on foreign affairs, a second-term precedent set by Richard Nixon during Watergate, Ronald Reagan after Democrats seized the Senate, and Bill Clinton when Republicans tried to impeach him over the Monica Lewinsky affair.

The President will need a new Secretary of State, as Hillary Clinton plans to retire, feeding buzz she will make a White House run in 2016.

Obama has enjoyed bipartisan support in trade deals. Iran, relations with China as the US pivots towards the Asia-Pacific region, and the war against al-Qaeda and its clones are challenges. But criticism of Obama, made by Romney on a visit to Israel, suggests Republicans will not extend an olive branch.

On the plus side Obama is more experienced. And the economy may pick up. Modest revenue increases and cost trimming, says Schmitt, may make the deficit less scary.

One of Obama's stump mantras is that the GOP's ideological "fever" may break. Without accord any second term will be haunted by fiscal nightmares. On December 31 the Bush-era tax cuts expire. Several key 2009 stimulus provisions also end. On January 1 US$8 trillion of tax rises and spending cuts kick in.

Republicans want to retain the Bush tax cuts. Democrats want to raise tax to pay for spending and cut the deficit. "The longer we wait the worst it will be," says Sabato. "And the more difficult a solution."