Compromises Take Toll on US President's Bedrock Supports

The economic prospects remain unclear, US President Barack Obama suddenly made a policy U-turn by calling on the Environmental Protection Agency (EPA) to withdraw its new proposal on ozone standards. He claimed that such a move was meant to reduce the burden on corporate so that it would not hinder the latter from creating employment opportunities. His supporters lambasted him for "surrendering" to corporate by sacrificing public health.
Law on Smog Emission
EPA Administrator proposed to tighten the law on smog emission. The proposal was strongly objected by lobby groups. The latter claims that the industrial sector would have to make enormous spending if the new pollution rule is implemented and this will cause more people lose their jobs.
But actually, limiting smog emission would not affect the employment rate much. On contrary, it may generate more job opportunities as a result of the increase of corporate investment and spending.
Obama argued that the already approved or implemented environmental regulations -- including regulations on eco-friendly cars and reduction of pollutant emission of power plants -- will help reduce environmental pollution. In any case, given the fact that even if the revision of the National Ambient Air Quality Standards for Ground-Level Ozone is passed in the Congress, the law will come into effect only a few years later, to a larger extent, Obama's withdrawal of the bill was done in view of political pressure and the presidential election next year.
Health Care Reform Plan
In early 2010, despite the objection from the Republican Party, Obama insisted in implementing his health care reform plan and accomplished one of the major goals the Democratic Party had sought for many years. The health care reform legislation has also become an achievement Obama has taken pride in.
Yet, after the Republican Party gained the control over the House of Representatives following the midterm elections held in November last year, Obama has become a lame-duck president. Under the pressure of the reality, Obama has started to flip-flop in his policies. For example, once he insisted to abolish the policy of tax reduction for the rich during the era of President George W. Bush. But he eventually put off this plan in December 2010. Early this year, he gave in to the Republican Party to prevent the government from shutting down.
Impact of Economic Recession
Obama can blame the Republican Party for the economic recession in the United States. But his repeated compromises have outraged and later disappointed voters who supported him. In fact, Obama has gradually lost his bedrock supports he enjoyed three years ago.
Obama once proclaimed: "I would rather be a good president for one term than be a president who achieves nothing in eight years." But in reality, it is hard to be a good president even for one term only.

Deepening International Economic Crisis

The crisis of capitalist system is rapidly increasing. The US economy is the backbone of the capitalist system. The United States is feeling it difficult to maintain this system. The economic rating of the United States has declined for the first time in the history. I will not try to make difficult my point of view through statistics and terminology. It is a simple thing that now the United States as state has nothing. The national growth and state loans have become equal. The annual national growth of the United States was $14.8 trillion and loan was $14.6 trillion. It means that the United States as leader of the capitalist system of the world has become debtor. The state has nothing to provide to its masses.
Obama’s Efforts
US President Barack Obama has struck a deal with Republican Party and decided to increase volume of state loans but the growth could not protect to the extra state loans. Although China has gathered lots of dollars yet the internal differences in the Chinese economy and like capitalist countries, Chinese development benefits are limited only to the upper class.
During the past three years, there were a large numbers of strikes in the history of China. A major part of Chinese foreign exchange income has been due to trade with the United States. However, now, the United States may not be able to purchase a large number of items which put direct impact on Chinese exports.
State of Allied Countries
The condition of the allied countries of the United States, which have capitalist system, is not good. The western media has always tried to hide the demerits and weakness of the capitalist system but now it has become impossible to conceal news in this regard as the disease has worsened. The economic condition of Greece has also become worst. There is shortage of resources with allied countries to steer Greece out of this economic crisis. This situation would also affect United States to a greater extent since it is not a welfare state.
The so-called reliefs to the common people which was being provided has become just nominal after the 80s decade. The welfare states of the Europe are facing problems to provide facilities to their people. For the first time, the demonstrations were held against economic problems in the United Kingdom. The capacity of the people to pay loan of the banks is declining day by day. The source was found to boost the industries through banks loans and plastic money, which now has put greater burden on the people and now they are unable to pay it. So, the demand is increasing in Britain that the banks should share the burden of the loans as they get so much income and the people have little capacity to pay it. Italy is sinking in the economic problems and it will be the next European country to become target of the economic crisis after Greece.
Impact on India
India which was being considered a fast growing developed country has failed to introduce practicable capital distribution system although the middle class achieved opportunities of growth in capital productions which helped in the running of trade and industries there. However, the majority of Indian population is quickly going down the line of poverty and more than 800 million people are living in a very miserable condition. The ruling circles of India are involved in corruption. At the moment, not only the governments are under pressure but all the political parties are also facing crisis.
The opposition pressure is mounting on the government of Congress in India. No one could object to the honesty and character of Indian Prime Minister Manmohan Singh but now he too is facing demands of resignations on account of allegations of corruption. The opposition is not leveling any allegation against his personality and they are saying that he is responsible for the corruption committed by his cabinet ministers and thus he should resign. The Bharatiya Janata Party (BJP) has forced one of its chief ministers to step down to increase pressure on the Congress government as he was involved in a big corruption scandal. The BJP is also not different from others with regard to corruption. The BJP ministers were involved in corruption, which was unearthed after the Kargil war. But then the pressure of the masses was not so strong against the corruption.
However, now, keeping in view the pressure of the people, the BJP has sacrificed one of its chief ministers to justify launching of campaign against corruption and making preparations to put Congress under pressure. The chief ministers of Tamil Nadu and Uttar Pradesh belong to regional parties and their governments were badly involved in the corruption whereas the situation of other states is also not different.
Declining Pakistan’s Economic Resources
The Pakistani economy is depending on capitalist system and the United States, its allies and their controlled financial institutions are providing most of our economic resources. However, the United States and its allies which themselves are facing crises could not provide any more help to Pakistan. Britain itself is failing to satisfy its people and its top priority would be its own people and it is not in a position to provide loans and aid to Pakistan. The United States already is avoiding to provide two-third of the assistance allocated for Pakistan. Similarly, it would be wastage of time to expect more aid from the United States. The International Monetary Fund, World Bank and Asian Development Bank can provide loans on strict conditions and their strictness would increase for the return of the loans. The war on terror has been imposed on us. No other power of the world is ready to share with us the burden of the expenditures of the war against the terrorism. The resources would not allow if any government will want to help Pakistan in this regard. The foreign reserves which are being maintained through loans have become doubtful now after the declining rate of the dollar and this fund of reserves could not go along with us for a long time.
Moreover, there is very little chance to increase income through exports. The Pakistani staying aboard could not save more in this present circumstances as their expenditures would increase to reduce the amount which they are sending to their kith and kin in Pakistan. Recently, a delegation of Pakistani traders had warned the government to avoid holding of foreign exchange in the shape of dollars and transfer the foreign exchange in other currencies, if it is possible, as the crisis of dollars would not be affordable for Pakistan.

US Debt Crisis of Concern to World

Recently, the debt crisis of the Euro Zone worsened and spread to Italy. However, this is no match for the growing possibility that the US Government may not be able to pay its national debt from 2 August onward.
US President Barack Obama has had a one-week-long negotiation with leaders of both the Democratic Party and Republican Party in a bid to avoid closing down parts of the federal government. The current debt ceiling set for the federal government of the United States is $14.29 trillion. This limit will be hit by 2 August. The US Congress has to approve raising this limit before this date. Otherwise, the government would have to put off some of its financial commitments.
Faster Depreciation of US Dollar
Ben Bernanke, chairman of the US Federal Reserve, warned that defaulting payment will trigger impacts to the global economy. More alarm was heard from two major credit rating agencies, Moody's and Standard & Poor's (S&P), which warned that if the political standoff persists, they will cut the United States' prized AAA credit rating.
There are a few reasons why the world, the developing world especially, should be on the alert under this situation. First of all, many developing countries hold a few billions of short-term US Treasury Bills as part of their foreign reserves. If happens, a debt default will have unpredictable impacts to countries that have no choice but to make a "haircut" or only have part of their Treasury Bills paid.
Defend Creditors' Interests
Although this seems quite unlikely, a debt default and downgrade of the credit rating alone will also devalue the US Treasury Bills. Moreover, the value of the US dollar seems to have depreciated faster lately. Thus, the losses may be bigger in the future.
Last week, China (which holds $1.15 trillion long-term US Treasury Bills) called on the United States to defend the interests of the holders of the US Treasury Bills through responsible policy and measures.
Secondly, if the impasse or the final solution plunges the United States into economic stagnancy or a new round of economic recession, the economic growth of developing countries will also be affected.
Substantial Cut in Government Spending
Regardless of the final deal of the US President and the two major parties, the core of the deal will certainly be a substantial cut in the government spending. This will cut down the effective demands of the economy. And this will contradict the effects of the monetary stimulus measures introduced by the Obama administration to address the economic recession. The stimulus package had successfully brought economic recovery to the United States in 2008 and 2009.
Thirdly, Washington stressed that there are uncertainties in the unhealthy dependence on the US dollar as the international foreign reserves. There is a need for reforms to reduce the dependence on one single currency. For example, some prominent economists like Joseph Stiglitz, Jose Antonio Ocampo, and Yilmaz Akyuz and some decision-makers like the governor of the central bank of China have advocated the Special Drawing Rights (SDR) (major currency basket) as a currency for global reserves.
Spur Reforms of Global Reserves System
Although a debt default of the United States is most unlikely, the matter has now turned from unimaginable to possible. This may once again trigger the discussions on the reforms of the global reserves system.
The facts of the current impasse facing Washington are as follows. The current $14.29 trillion debt ceiling will be reached by 2 August, therefore new borrowing is not allowed before this date. The government estimates that the debt ceiling has to be raised to $24 trillion, so that the government could fulfill its promises made for the period after the presidential election a nd before November 2012.
Many Republican congressmen, especially those influenced by the Boston Tea Party, hope that the government could achieve budget balance through substantial cut of spending without raising taxes.
But some Republican leaders are willing to consider small tax hike or even closing the tax loopholes. However, they find it hard to convince their colleagues in the party. They also hope the cut of spending could exceed the increase of the debt ceiling.
The President and Democratic Party are willing to cut down the spending substantially, but they also hope to raise the taxes on the rich, so that both can contribute to the reduction of the budget deficit. Leaders of the Democratic Party said unyieldingly that social and medical security must not be affected, although Obama is willing to allow some cut in this area.
Should the extreme attitude of the Boston Tea Party become the mainstream in the Republican Party, it will be a tough task to strike the deal. The Democratic Party and Republican Party must give in fully to solve this problem.
Should the impasse persists, a possible solution is the proposal made by the Senate Minority Leader, Mitch McConnell. During this period, the President proposed the plan to increase the debt ceiling and cut down budget, but the plan was rejected by the Congress and the President voted against it. McConnell's proposal will be passed, unless two-thirds of the Congress vote against it again.
Regulatory System Collapses
This has also made all quarters claim that they will hold on to their stands and avoid the crisis.
If no consensus is reached by 2 August, then the US Government would have no choice but to choose not to pay what items and when these items would not be paid. These include the interest of the short term national debt, social security, health care, vendors, unemployment relief, food, military expenditure, salaries for employees of the federal government, etc.
The priority will be paying debt. Thus it is very unlikely that the US Government would not pay the debt, unless the impasse persists for a long time. When there is no transaction, other services and remuneration will be affected and increase continuously.
Almost everyone would agree, there will be no way out for the government if it operates this way. Yet, the regulatory system of the United States is losing its functions. This has caused serious impacts to other countries. Therefore, everyone hopes that they could come out with a solution before 2 August.

Obama's State of Union Address

US President Barack Obama's State of the Union Address delivered on 25 January can be viewed as his prelude to seek second term presidency in 2012. Obama has just completed the first half of his presidency. The second State of the Union Address is like a mirror that can reflect what Obama wants to do in the next two years. In this Address, Obama urged both the Democratic Party and Republican Party to work together in improving the US economy. While he wanted all politicians from the two parties to put the nation above politics, he also warned his political rivals not to pull one another's legs when the people of the United States are suffering from economic hardship. He said that if this was not observed, then both the parties could become losers at any one time.

In this second State of the Union Address, Obama did not waste too many times and words on US foreign policy. On the Middle East Peace process, which is a hot potato, Obama did not say a word. On international affairs, the praiseworthy words of Obama in his Address were none other than telling the people that the US military mission in Iraq would soon come to an end.

Revival of Economy

The pace of the US economic recovery has been slow. The US unemployment rate remains as high as above nine percent. The high US federal deficit that cannot go down has led to continual expansion of federal debt.

The reason why the Democratic Party led by Obama could lose out in last year's congressional elections was the Democratic Party has failed to ease the people's concern about the worsening economic situation in the country. If Obama wants to pave a smooth path to run for the next presidential election, then he has no other choice but to focus on domestic economic issues.

Health Care Reform Bill
During the presidential election campaign held two years ago, Obama has made the commitment to promote the sharing of power between the ruling Democratic and the opposition Republic party. Unfortunately, Obama's health care reform bill has divided the two political parties as fire and ice. Not too long after the Republican Party regained control of the House of Representative after the 2010 congressional election, the Republicans have already proposed the abolishment of Obama's health care reform bill.

The remarks addressed to the Republicans by Obama in his latest State of the Union Address have carried with it a special message. He said that when all sectors in the society made evaluation on him and on other congressional representatives, their evaluation "will be determined not by whether we can sit together tonight, but whether we can work together tomorrow." Although these remarks by Obama have won applause from the whole floor, we believe while the superficial applause coming from the Democratic and Republican congressional representatives were as loud as each party could release, but the deep feelings between the two political camps were different.

The gunshot tragedy in Tucson, Arizona, shocked both the ruling and opposition parties. The poisonous atmosphere in the US political scene has raised red light. To the Republican politicians who have formed a strong force to prevent Obama from being re-elected as a second term President, they know that if they focus only on confronting and opposing the US President and the Democratic Party without considering the feeling of the people, the general public who gave them the votes during last year's congressional election might embrace the Democratic Party again in the next presidential election.

National Policy Implementation
In this regard, when President Obama urged both the parties to join hands and rescue the US economy, not only could he win the hearts of the middle and independent voters, he could also push the Republicans to a corner losing both their advancing and retreating ground. When Obama talked about his thrifty budget plan, he said "We will move forward together, or not at all." With such a statement, President Obama has warned the Republican congressional representatives that if the US Congress failed to achieve any federal budget reduction plan, the overall Congress will upset the people. In the end, no party could reap benefit or take advantage of each other.

From the contents of Obama's latest State of the Union Address; we can observe that in the next two years, President Obama will adopt a pragmatic policy based on concrete work and concrete fight in dealing with national issues. For example, in this round of State of the Union Address, Obama did not mention the legislation of the huge and massive health care plan but instead he has thrown out some proposals deemed pleasing to both the Democratic and Republican Party. This has shown Obama has not only reinforced his 'fundamental political base", he has also tried to absorb some of the Republican congressional representatives to his national policy implementation track to reduce and counter-attack strength of his political rivals.

Lack of Strength
However, before President Obama has released the full contents of his second State of the Union Address, some Republicans have already launched their counter attacks on his speech without any delay. They sent emails to the media criticizing the lack of strength of Obama's decision to freeze federal spending.

If we say this State of the Union Address released by President Obama has subtly drawn open the battlefield curtain of the next US presidential election. This is not an exaggerating conclusion.Overall, Obama's second State of the Union Address has promoted national unity. The Address has included both Obama's defense and attack strategy in dealing with his political rivals.

Obama Visits China

US President Barack Obama headed for Beijing and continued his historical first trip to China. Some media commentaries say the impact and significance of President Obama's first official trip to China can be comparable to former US President Richard Nixon's first official trip to China in 1972 and former US President Clinton's first official visit to China in 1997. This is because all the three US presidential trips to China carried with them the respective US President's intention to create a new chapter in US-Sino ties.

Balance of Power
Since the course of world events shifted from the bipolar confrontational Cold War era into the post-Cold War multi-polar era characterized by balance of power, the US-China relationship has been rebuilt all over again in the form of strategic partnership relationship. Of course, in between those past years, of note was that the US-Sino ties did go through some setback due to the 1989 Tiananmen Square crackdown frustration.
In the future, political ideological or political dogma will no longer be the key element in the new international order structure. Instead, the pragmatic economic strength of major powers will become the base of international order and power in the coming days. How the United States can continue to play its leading and dominant role in the international new order will depend on whether the United States can display its decisive influential power in the international economic new map that is gradually taking the form in regional regrouping and integration.
Before leaving the United States, President Obama said that the United States planned to conduct friendly competition with China focusing on consumers and competition in the trade market. The so-called friendly competition should include the RMB appreciation, trade liberalization, trade balance, intellectual property rights and other issues. But these are all highly controversial issues. It would be difficult for President Obama to reap concrete gains within short period of visit. President Obama's visit to China is but a symbolic tour. There are more to be done.

US National Interest
Thiry-seven years ago, When Nixon's plane touched down in Beijing, Nixon said: "I came for US interest!" 12 years ago, when Bill Clinton defended his China policy, he said: "I went to Beijing because of US national interest!" This time, President Obama also pledged to protect US interests for this China trip. He even said that the Democratic Party would as always, and be more attentive than the Republican Party to attend zero level of trade pattern with China. Because of the reality that economic power has become a dominant factor in future international order, and since the Asia-Pacific countries, especially China have shown strong economic growth force from the beginning of this new century, President Obama has to make his way to knock at the gate of the East.
The mission of President Obama's Asian trip is to reduce trade friction with China. It is also the US intention to build a 'containment' defense line along Asia-Pacific to protest the US interests. This containment line will begin from Australia in down south going through Singapore along the Straits of Malacca and turn north to link up the southern Korea Peninsula until the Japanese archipelago. The target of this US containment line is self-evidently pointing to China. Before President Obama left Washington, he stressed that "within the clear framework of international rules, the United States and China should each bear their corresponding responsibility."
It is obvious that the United States expects the Beijing authority to undertake the responsibility to protect global environment, human rights, etc. At the same time, President Obama also pledged to "intensify the efforts for the United States to involve in Asian affairs." This shows that the United States still wants to maintain its status as a military strong power in Asia to ensure the security and peace in the Asia-Pacific region and to continue taking up its role to maintain the balance of power in the region.

Change in US Strategy
This change in US strategy in the Asia Pacific region is reflected in the transformation of foreign intelligence gathering tasks of the US Central Intelligence Agency (USCIA) which puts emphasis on the intelligence collection and research analysis on China and Japan. This is probably because there are many unpredictable variables in China's future. The United States naturally does not want to take China lightly. On the other hand, the penetration and invasion of Japan's economic and trade power in the United States have also resulted in the USCIA having the need to strengthen Japan's industrial intelligence gathering research effort.
In the past, cooperation of the United States, Japan and Asian countries is rooted in the common interests of wanting to ward off the threat coming from former Soviet Union. Now the Soviet Union as a major power does not exist anymore. With the emergence of China, the common interests between the United States and Japan will need to re-adjust and re-position. Precisely at this time, the difference in the economic strength between of the United States and China, its Asian economic rival, is also getting larger. Therefore, from Washington's perspective, the most important calculations for the United States to establish a new international order will include on how the United States can reduce trade and economic difference with China, how the United States can regain trade balance with China, and how the United States can cooperate with China to form an interactive strategic partnership relationship.

Strategic Partnership
From President Obama's China trip to Hu Jintao's later US trip, we should by now understand that the "strategic partnership" of both nations will continue to improve as the result of change in international situation. The United States' "constructive engagement" with China will also become more pragmatic when it is driven by national interest.
As for the substantive issues of concern to the United States, we trust the United States will hold on tightly to them. But as for non-substantive issues the United States will gradually let go when dealing with China. We cannot expect President Obama' first visit to China can make concrete gains. This is also the intricate of the US-Sino Strategic Partnership spirit that amid friendliness diplomatic visits, there are also competition.