Driven by data; ridden with liberty.
Barack Obama has been re-elected as the President of the United States, whilst Congress remains divided, with Republicans controlling the House of Representatives and Democrats retaining a majority in the Senate. This piece, the first out of four, will examine the last four years of American domestic policy, and what Obama’s re-election means for the next four.
When President Obama came to office in January 2009, the unemployment rate was 7.9%, peaking at 10.1% in October 2009, before subsiding irregularly to 7.8% in September 2012. There were also serious domestic trepidations about the stability of the United States banking system and the wider economy, personal debt and health care. In many regards, Obama’s second term will be a consistent continuation of his policies in the first term.
The keystone policy of Obama’s domestic platform, the Patient Protection and Affordable Care Act 2010 (huge PDF), usually called Obamacare, will take until 2020 to be fully implemented. Along with its package of amendments, the Health Care and Education Reconciliation Act, the primary goal is the reduction in the number of uninsured Americans and the prices paid by Americans for that healthcare. Obama’s reform represents the largest and most historic overhaul of the American healthcare system since the introduction of Medicare and Medicaid in 1965, and at least aims to have the American populace covered by health insurance. This is achieved by multiple mechanisms: mandates, tax credits and subsidies. As separate parts of the scheme are rolled out, the Obama administration will likely monitor the legislation’s effect on the economy.
With the aim of preventing further collapses in Wall Street, President Obama passed the Dodd-Frank financial reform Act in law, whilst simultaneously removing certain regulations as part of the JOBS Act. A minor piece of financial modification was the Credit CARD Act 2009, which mandated that consumers are informed of precisely how long it takes to pay off their credit card debt. The student loans system was also disentangled from banks and is now directly distributed by the Department of Education.
With stubbornly high unemployment, a national debt ballooning over $16 trillion, a large federal deficit, the economy and federal government spending is a natural priority for many Americans. Despite the mimetic success of the American Recovery and Reinvestment Act (ARRA) 2009, the consequent stimulus spending increased the national debt by about $831 billion, according to the Congressional Budget Office. Whilst government spending is often the focus of that bill, what is largely forgotten is that the ARRA also contained about $282 billion in tax cuts, making it one of the largest tax cuts in history. However, the Congressional Budget Office was attacked for their analysis of the employment effects of that bill. Their analysis was a model which contained low and high estimates for the ‘multiplier effect’ of government spending, meaning that their model assumed what it was aiming to prove.
The unemployment rate has now returned to the levels at the very start of President Obama’s first term, but falls far short of Obama’s campaigning promise. This severe miscalculation has certainly tempered his audacious promises, which were somewhat absent from his 2012 campaign. After spending his third and fourth years debating, arguing and wrangling on tax reform with Republicans in the House of Representatives, Barack Obama wants to lower individual and corporate tax rates, whilst raising taxes on Americans earning more than $200,000 a year, through a repeal of the marginal Bush tax cuts. This clash between the President and House Republicans is certain to continue, with the ‘fiscal cliff’, eroded out by legally-mandated and vast increases in taxation and sweeping cuts in spending, fast approaching. The President has also proposed a higher federal minimum tax rate of 30% on those earning $1 million yearly, under the name of the ‘Buffett Rule’.
There are also proposals, under the umbrella of the Start-up America Partnership, for tax cuts for small businesses who hire workers, the abolition of the capital gains tax on small-business stock and state subventions for private equity investments.
In the shadow of a federal deficit nearing $1 trillion, tough decisions on spending have had to be made. The Statutory Pay-As-You-Go Act was passed into law by President Obama in February 2010, which means that new spending allocations must be offset by spending cuts elsewhere or by new revenue. There are also going to be major cuts in the US Defence budget, which simply eclipses the military spending of all other nations on the planet, in line with what leading military personnel have requested, and with the evolving demands of the military. However, Obama has sought to preserve the Medicare and Medicaid programs, which are popular amongst American, whilst offering other programs to be cut. There are also a large number of infrastructure projects being planned and funded, including the modernisation of 35,000 schools, but have yet to be even started, despite Obama’s rhetoric about “shovel-ready jobs”.
On civil matters, Obama remains a complete farrago. The repeal of ‘Don’t Ask, Don’t Tell’, the law that restricted openly gay people serving in the US military, was not only historic, but represented the fulfilment of an old Democrat Party promise, one cruelly denied by President Clinton. Obama has also “evolved” his opinion on gay marriage: he opposed it during his 2008 campaign, but now supports it.
Even though Obama promised to “revisit the PATRIOT Act to ensure that there is real and robust oversight of tools like National Security Letters, sneak-and-peek searches and the use of the material witness provision”, Obama reauthorized the PATRIOT Act but offered no official oversight of the Act’s various invasive tools. Obama also signed the National Defence Authorisation Act for Fiscal Year 2012, which reaffirmed the presidential authority for indefinite detention without trial. The detention powers are currently under legal challenge from the American Civil Liberties Union, who fears indefinite detention could be forced upon anyone the President wishes, an incredibly wide scope for a phenomenal president power. The President also signed an executive order for the closure of Guantanamo Bay a few days after he came into office, which still remains open. Obama’s second term may finally see its closure.
President Obama also asserted during his campaign that he would not allocate federal funds to shutting down medical marijuana clinics, which are legal in some states: “I’m not going to be using Justice Department resources to try and circumvent state laws [on medical marijuana].” Obama later clarified this statement with an interview for the Rolling Stones magazine: “What I specifically said that we were not going to prioritize prosecutions of persons who are using medical marijuana.” However, the enforcement activity, as reported by Lucia Graves of The Huffington Post, is as follows:
Since then, the administration has unleashed an interagency cannabis crackdown that goes beyond anything seen under the Bush administration, with more than 100 raids, primarily on California pot dispensaries, many of them operating in full compliance with state laws. Since October 2009, the Justice Department has conducted more than 170 aggressive SWAT-style raids in 9 medical marijuana states, resulting in at least 61 federal indictments, according to data compiled by Americans for Safe Access, an advocacy group.
Given the states of Colorado and Washington has affirmed in a referendum that the possession of marijuana should be legal, this clash between the Obama administration and the states of the union will project into his second term and beyond.
For American citizens, the new Obama administration will vacillate from the achievements of his first term, hoping to restore the economy after eight years in office, from the dilapidated condition that the President inherited it. However, it will become more difficult to blame the Republicans and the last Bush administration as Obama lingers in office. The general election left the American legislature in a similar condition to before, with a Democrat Senate and a Republican House of Representatives. Both the President and the Senate will have to engage with the House Republicans on all the impending issues. The healthcare reform will be judged on its effect on Americans and their economy, whether each activating line of legislation becomes woven into a strong social support for the American people or an enveloping restraint on their economic ascent.