Many observers expected that US President Barack Obama would lose his re- election bid. They believed that the US economic condition would have been the primary reason for him to lose — just like the ruling parties in Greece, Italy and Spain. However, Obama won comprehensively.
This happened despite the fact that the campaign of Mitt Romney focused on the repercussions of the financial crisis.
The reasons behind Obama’s victory are related to political, social and economic factors. On the political side, Americans have become less receptive of the manifestos and agenda of the neo-conservatives.
On the social aspect, Obama’s support for social support schemes, including health insurance, which was widely welcomed by American citizens and opposed by the Republican Party, as well as Obama’s stance on women’s rights, change in the country’s demographic structure and the increase in the number of Latinos and coloured people, all together contributed significantly to his victory.
Focusing on the economy, Obama avoided the austerity policy during his first four years, that has and still is raising strong anger in Europe, where the International Monetary Fund has recently warned that austerity in Europe “can create an intolerable political and social situation”.
Obama came up with incentive measures and presented an integrated plan to save the auto sector, one of the pillars of the US industry in which one out of every eight is employed in the politically crucial state of Ohio.
At the same time, his campaign emphasized that the Republicans, led by former US president George Bush, caused the financial crisis, and Romney’s election would lead to a further economic decline and stop the improvement in the economy, including the creation of five million jobs in recent years.
Now, that the election is over, and things still look good for the re-elected President. But soon he will be facing challenges and opportunities for the recovery of the US economy along with the global economy.
Significantly, Obama will be free from a lot of restrictions during his second term, and thus he can make some amendments to his economic policy.
In this aspect, preliminary indications show that the new Obama administration will embrace the same approach adopted by the British government led by Britain’s Prime Minister David Cameron. Obama is expected to use the same recipe of combining quantitative easing policy — printing banknotes and the well studied austerity policy — the policy that Obama tried to avoid in the pre-election period due to its potential impact on the electoral process.
And if Obama’s pre-election policy was limited to quantitative easing and incentives, the post-election period has begun earlier with the talk now in the US administration on cutting expenditures in the US budget to reduce accumulated deficit, control public debt and raise taxes on the rich and reduce them on middle class citizens, to which he referred in his first address to the nation after winning the election.
The austerity policy may affect some aspects of expenditure related to public services, in addition to military spending after US withdrawal from Afghanistan, as Obama said clearly during his campaign when he stressed the need to transfer funds from militarism to education.
In this case, the President’s new economic policy will not spark that much anger as demonstrated by the British experience, unlike European protests. But the House Republican majority remains the sole obstacle before Obama since they will block some of his new approaches, such as those related to raising taxes on the wealthy that affect their interests directly.
Obama is expected to succeed in the revitalisation of the US economy through his new economic approaches, noting that his policy will face big challenges and difficulties, among which are reservations expressed by the business sector, proved by the decline in stock markets after the announcement of Obama’s victory last week.
On the international level, US economic policy under Obama’s second mandate will try to make the most of changes in international economic relations, especially taking advantage from the potential of emerging countries, such as China, Brazil, India and Russia, in addition to coordination with European Union countries, which will reflect positively on the world economy as a whole, speed up the recovery from the most serious economic crises over the past 80 years.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.