Year in review: US downgraded and desperate in 2011

Occupy Wall Street protests raced around the world as many people identified with the call to make the 1per cent more accountable. Photo / AP

At times the mood in the United States this year seemed almost dystopian, as a weary, debt-laden nation contended with political deadlock, economic woe, street dissent, extreme weather and a gnawing fear that maybe America's moment in the sun was over.

Three years after President Barack Obama promised to bring hope to Americans, public spending cuts at federal, state and local levels, plus a stagnant economy, left many desperate. Home foreclosures, debt, unemployment, spiralling costs and a widespread perception that the few had exploited the many - and got away with it - fuelled grassroots anger.

While the Tea Party steered congressional Republicans hard right, the left-leaning Occupy Wall Street movement took to the streets across America as its rallying cry, "We are the 99 per cent!" echoed around the world.

The Tea Party vowed to change the way Washington works from the inside, operating as a radical caucus within the Republican Party.

Committed to low taxes, scant regulation and small government, the Tea Party's inflexible ideology did not bode well for Obama's grand transformative dream, from fossil fuels to renewable energy, that would build a green economy, cut carbons and help America compete in a new world order as it contended with the rise of dynamic rivals, in particular China, Washington's biggest creditor.

Instead, 2011 was often a gruelling slog of relentless partisan politics, as Obama and congressional Democrats - whose majority in the House of Representatives evaporated with last year's mid-term election which brought Tea Party zealots to power - battled Republican obduracy.

The toxic atmosphere raised the spectre of a government shutdown, narrowly averted in April. On July 31, after weeks of impasse that roiled markets and raised the extraordinary prospect of an unprecedented default by the world's largest economy, Republicans finally agreed to raise the US$14 trillion ($18.3 trillion) debt ceiling in return for US$2 trillion in federal spending cuts, a grudging compromise that did little to ease US economic woes.

Days later, Standard & Poor's downgraded Washington's long-term credit rating, from AAA to AA+, for the first time in US history.

The Occupy protests took place outside Congress and focused on social and economic reform, in particular addressing the huge and growing chasm between the haves and have-nots in a society where the American Dream is a bitter taunt to many.

In December, the Census Bureau reported almost one in two Americans, 146.4 million out of a population of 308 million, or 48 per cent of the total, was either poor or struggling on a low income, defined as US$45,000 for a family of four. Family income for the top 5 per cent rose to an average US$313,000.

The economy remained the main news story. Unemployment rates dipped to 8.6 per cent in November, down from 9.4 per cent in January, although those who gave up seeking work, or who work part-time, were not included. The growth rate was 1.8 per cent in the third quarter, compared with a 3.28 per cent postwar average. The upside was that the US trade deficit shrank in October.

If 2010 was dominated by the BP oil spill in the Gulf of Mexico, this year's cause celebre was the Keystone XL pipeline, an ambitious scheme to ship crude oil from Canadian tarsands to the Texas Gulf.

Proponents argued it would bestow "energy independence" from the Middle East, a tantalising prospect as the US finally extricated itself from Iraq, leaving 4487 American troops dead, 32,200 wounded and up to 113,680 civilians killed, even as savagery intensified in Afghanistan, and Obama stepped up drone attacks on al-Qaeda and its affiliates in Pakistan and the Horn of Africa.

Pipeline opponents, who included thousands of protesters outside the White House, blasted it as a retrograde step that deepened fossil fuel dependence even as a biblical succession of extreme weather - tornadoes, floods, fires, droughts and hurricanes - associated with climate change saddled the economy with 12 US$1 billion events.

Seeking to neutralise a project that could erode green support for Obama's re-election bid, the Administration postponed any decision until after the presidential contest.

Republicans torpedoed that move this month with a clause in the payroll tax extension law - another delay, this time in setting unemployment benefits, Medicare doctors' fees and payroll tax rates - that mandated Obama proceed within 60 days, unless he could prove the Keystone KL pipeline "would not serve the national interest".

Republicans sought to eviscerate the Environmental Protection Agency, ostensibly to trim the federal budget. Critics, such as veteran Democrat Henry Waxman, who blasted "the most anti-environmental Congress in history", said sweeping back air and water quality laws would be a boon to fossil fuel techniques.

As Obama battled with far-reaching economic and environmental issues, the contest to select a Republican presidential candidate for the 2012 election often seemed risible, politics as usual at its worst.

In the Hollywood classic Mr Smith Goes to Washington, a clean pair of hands comes to the corrupt capital as a people's reformer. In contemporary America the democratic process took on the surreal edge of a political reality show. Property tycoon and reality show star Donald Trump championed the "birther" movement, which insisted Obama had no place in the White House because the President was not born in the US.

Obama's birth certificate disproved this contention. But this storm in a teacup was part of an angry conservative tempest that filled the sails, briefly in most cases, of perhaps the strangest field of Republican presidential candidates in US history, including for a short time Trump himself.

Many courted the Tea Party, a fickle champion. By year's end Herman Cain, a former pizza restaurant tycoon, had imploded in a sex scandal. Minnesota Congresswoman Michele Bachmann and Texas Governor Rick Perry had slipped to single digits in polls that measured the intentions of Republican primary voters. And Tea Party darling Sarah Palin, the 2008 Republican vice-presidential candidate, flirted with running but exploited her fame on reality TV.

Her popularity plunged when Congresswoman Gabrielle Giffords - shot in Tuscon, Arizona, in January by a gunman who killed six people and wounded 13 others - was found on a "crosshairs" map targeting legislators who voted for Obama's healthcare bill on a Palin support website. It exhorted followers: "Don't retreat, instead - RELOAD!" Palin's bizarre claim that the ensuing condemnation amounted to a "blood libel" further undermined her credibility.

As the candidates battled towards the Iowa caucuses on January 3, Newt Gingrich, a throwback to the Bill Clinton era when he was Speaker of the House of Representatives, was neck and neck with Mitt Romney, the multimillionaire favourite of the Grand Old Party establishment, while libertarian septuagenarian Ron Paul nipped at their heels.

Romney, branded by opponents as part of the 1 per cent, seemed out of touch with many ordinary Americans. Obama's re-election team painted him as part of the 99 per cent and The Protester became Time magazine's "Person of the Year".

This month Occupy supporters protested outside Fort Meade, Maryland, where Bradley Manning emerged for the first time since his 2010 arrest at a hearing to see if the US should court martial the army private accused of leaking more than 250,000 cables to WikiLeaks.

Prosecutors allege he spoke to Julian Assange in an online chatroom as the WikiLeaks founder helped Manning decode passwords and upload files.

Despite claims that he stood with the 99 per cent, Obama agreed to temporarily sustain Bush-era tax cuts. Democrats wanted to tax the rich more to trim the deficit, which by November was US$15 trillion.

China's Dagong Global Credit Rating warned it might downgrade the US unless it tamed the deficit, a harsh reminder that economic power is bleeding across the Pacific to America's second-largest trading partner.

Illegal immigration, ever intractable, with some 11.2 million illegal aliens, mostly from Mexico and Central America, in the US, threatened to become a presidential issue as several states passed draconian, and possibly unconstitutional laws.

Still, by year's end there were tentative signs that the US economy was rebounding, albeit in a small way, as growth picked up and consumer confidence rose.

The US Commerce Department said this month that overall annual growth was at 1.8 per cent, as construction and manufacturing picked up, while spending climbed 5.7 per cent as Americans opened their wallets again. Markets were also up.

Obama's approval rating rose to 47 per cent this week, after he forced congressional Republicans to extend the payroll tax cut for 160 million Americans, adding an extra US$40 a fortnight to average paypackets - or see a tax rise on January 1.

It was the first time since July that Obama's approval exceeded his disapproval rating, a sign the economy is looking rosier as the President positions himself for an election this issue is likely to dominate.