Economic Interests

If you owe the bank £100, that's your problem. If you owe the bank £100 million, that's the banks problem.

Obama’s first term

Barack Obama has been America’s 44th president since 2009, and the first African American president of the country. He has had a tough time in office with the USA facing one of the biggest economic disasters in its history, but he has also experienced some highs like winning the Nobel Peace Prize in 2009. With Barack Obama running for a second term in office, now seems an appropriate time to review his first term.

First up is the American Economy, which remains a weakness for Barack Obama in the ongoing elections, as Mitt Romney (the republican candidate) continues to use the subject as his biggest weapon against Obama. Unemployment which peaked at around 10% in Obama’s first year has declined to 8.2% (a credible achievement) but remains very high for the world’s biggest economy, with Germany’s unemployment at only 5.6% this year. GDP which declined by 3.6% in Obama’s first year in power has grown slowly since, with the projected 2% growth this year looking set to be under hit. Even more worrying is the fiscal cliff America is heading towards in January, with GDP to drop by 5% if Obama cannot reach a new deal with the Congress over the budget deficit. The budget deficit remains over a trillion for the fourth consecutive year and has already cost the USA their AAA credit status with S & P and could cost them further with more credit agencies if they don’t make an attempt to balance their books. Instead, Obama has spent a higher percentage of GDP than in any other year of America’s history barring WW2 with 25.2% of GDP in 2009, 24.1% of GDP in 2010 and 24.1% of GDP in 2011 while in 2012 they are predicted to spend 24.3% of GDP.

The fiscal cliff that the USA is heading towards at the end of the year, the equivalent to 5% of GDP.

But Barack Obama’s leadership of the economy has not been all bad. Exports contribution to GDP has grown during Obama’s reign, as a weak dollar coupled with increased spending in countries like China has seen American exports revive – with the trade deficit decreasing from 6% to 4%. American banks are also much more secure than their European counterparts now as America reacted much quicker in reforming their financial system, with capital ratios the highest in the world now. Individual debt has also decreased under Obama’s time in power from a high of 133% of income to 114% of income now, showing a realisation in American culture of dealing with their debt. One of the real issues has been the lack of compromise between a democratic president and a republican congress, which has handicapped Obama, slowed down the USA’s recovery and threatens to cause another recession in the future. So in economic terms, Obama has had to work in a tough environment with a republican congress and an underperforming global economy (the euro crisis in particular), while a lot of the problems he is dealing with were passed down from the previous governments. But there is a feeling he could have done more to improve the recovery and increase jobs, so while he has hardly gone backwards, he isn’t exactly racing ahead.

While Barack Obama has created more jobs, the growth in jobs has stalled somewhat recently.

Another area to judge Barack Obama’s first term is in foreign policy. Obama has proved successful in pulling out of Iraq, in establishing an exit date for Afghanistan (where an earlier exit could have thrown the country into chaos) and in killing Osama Bin Laden, the leader of a highly dangerous terrorist group. He has had more mixed success in other situations; with the intervention in Libya seeing France and Britain take the lead, the assignation of Osama Bin Laden in Pakistan causing disputes between the two governments and the concentration on allies neighbouring China increasing the tension between the two global giants. Then there has been the outright failures; with thousands dying in Syria while the USA remain constrained by the UN from intervening, Iran looking increasingly capable of nuclear weapons and his promise to solve the conflict between Israelis and Palestinians remaining un kept. Overall, Barack Obama’s international approval ratings have dropped since he took power in 2009, which makes sense as a lot of his successes were nearer the start of his term, with countries perhaps taking advantage of Obama’s unwillingness to use military intervention in an election year. But in foreign policy terms he remains a big improvement on George Bush, while his decision making has largely proven correct, with a more calm and reserved approach much more favourable to the America of old that jumped into situations with little planning beforehand.

An iconic moment in history as Barack Obama gives the say for the assassination of Osama Bin Laden

Finally, there are the big reforms Barack Obama has implemented domestically. The biggest reform Obama has tried to implement is the new health care act, which resembles a more European approach to health care where everyone is covered from the day they are born, regardless of any disease they already have. In America however, insurance companies are a key part of the industry, so this meant everyone would have to be forced to buy insurance, which was argued to be unconstitutional by critics. The problem was that whichever way the Supreme Court decided to go down, Obama would have difficulties. If they found it unconstitutional then a clear policy of Obama’s would have been rejected and it would have been a massive hit to his re-election hopes. If they found it constitutional (which they eventually did) then Mitt Romney could campaign against the act, with a republican president backed by a republican congress able to scrap the act before it even came into power if he won the elections. Either way the reform is controversial, with many Americans wary of becoming too socialist, while on the other side of the coin the act still remains far away from the praised models that Europeans use, where insurance companies are not part of the health care industry. With America spending much higher percentages of it GDP on health care but still under performing against its European counterparts, a reform was necessary, but it remains to be seen whether it will prove a better system.

Another major change in Obama’s term in charge has been the financial backing of “fracking” technology. This technology has allowed America to access its considerable supply of Shale Gas, which has helped lower energy bills, lower Carbon Emissions (replacing coal) and should see America become a gas exporter in the near future. This will allow the USA to become less exposed to the volatile global oil prices, which helped destabilise the American economy last year. The only big issue is that the technique is not completely safe, which could prove a problem when companies are trying to drill near public places. The Climate and Education sectors have sparked criticism however, with Barack Obama failing to implement needed reforms. He has yet to complete his election promises of introducing cleaner energy and reducing the carbon emissions (though it is arguable they were long term targets that need more time) while the American school system remains union dominated and includes serious flaws in the teaching systems. Higher education continues to rack up a lot of debt too, as money is thrown at students that they will struggle to pay back during the rest of their lives. Finally the immigration system remains imperfect as America are poor at attracting the best talent. They offer visas to foreign investors, but requirements of at least $1 million investment make them unpopular while America offers as many visas to skilled workers as Australia, despite having 14 times the population. Also permanent visas offered to foreigners for economic reasons fell from 18% to 13% in the last 20 years, in comparison to Canada whose offering of the same visas rose from 18% to 67%.

The USA’s carbon emissions remain high.

So how has Barack Obama fared in his first term in charge? It would be very harsh to suggest he has failed in his first term, but equally it hasn’t a shining success. In economic terms he has lead the country out of a recession that was started before he took charge, though the recovery appears to be stalling. While the rivalry between him and the Republican congress over the budget deficit threatens to lead America into big budget cuts that could cost the economy 5% of their GDP. So while he has done a steady job in the short term, he continues to ignore the long term debt problem and that means I can only award him a C grade. In foreign policy, he started off well but has had to face much bigger problems as his term comes to an end. Despite this I think he has acted well and remained calm when others would have acted without thinking, so I am awarding him a B grade. Finally, his reforms of the country have yet to prove very successful. His health care act is unpopular, despite perhaps having the right principles behind it, while the lack of reforms in education and immigration are stifling America and threaten to damage their future, so I am awarding him a D grade. Overall, this averages out at a C grade, so an average first term for Barack Obama.

Still he should win a second term, he remains a better candidate than Mitt Romney and history backs him as most presidents win a second term (if George Bush can win a second term, Barack Obama can). I would also support him for a second term, the USA needs consistency right now not a major over haul while some of Obama’s policies also need some time to take effect. If he does win, he faces some big challenges (mainly not letting the country fall off a fiscal cliff) and has a lot to prove to the country that he really intends to implement his main campaign promise: change.


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2 thoughts on “Obama’s first term

  1. Nicely written.

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