Obama's Europe bounce

It was a crash course in realpolitik, producing a wiser and savvier leader.
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Time to shift to change we can absorb?

It was a crash course in realpolitik, producing a wiser and savvier leader.

President Barack Obama is coming back home after an intense week of international diplomacy in Europe. He is also coming down the stretch of his "first 100 days" of ambitious initiatives. He will find brief relief on the home front since the Congress will be in recess for the next two weeks.

I feel better about Obama's personal performance than at any time since his inaugural. He performed well and learned much in Europe. He clearly is getting a better handle on financial/economic issues day-by-day. My principal worry remains that he has overreached with his domestic proposals.

Let's start with the President's European trip, which had mixed results. He campaigned intensely, both among G-20 and European leaders and in public forums in several cities. He gets an 'A' grade for his and Michelle Obama's reception among both elites and common folk. On the substantive side, he gets a 'B' for falling short with his principal objectives but making the best of what he could get.

Obama headed to the Group of 20 meetings focused on getting other countries to match our own government stimulus spending. He struck out on that front. He went to NATO meetings focused on getting combat-troop commitments by our partners to the Afghanistan/western Pakistan intervention, which is NATO sponsored. He struck out there too. But, in both places, agreements were made which maintained G-20 and NATO solidarity and provided some half-loaf compromises.

Obama, on departing those meetings, employed the famous Aiken Formula of the Vietnam-war era. (Vermont Sen. George Aiken suggested that the U.S. "should just leave and say we won.") He claimed victory and trusted that no one would examine the fine print.

The G-20 did give the world economy a boost by allocating more than $1 trillion to the International Monetary Fund to maintain developing-country trade. Obama made concessions, in particular, to the French and Germans who wanted greater international oversight of the banking and financial systems but stopped short of yielding U.S. sovereignty on that front. China and Russia, before the G-20 meetings, fired a shot across the U.S. bow by suggesting the dollar should be supplanted as the world's reserve currency. They did not push the issue at the London meetings, but their message will goad the U.S. to keep the dollar as strong as possible during even the current deep recession. The G-20, which includes a number of emerging economies, has in fact supplanted the Group of Eight (G-8) countries as the principal financial/economic coordinating body internationally.

At the NATO sessions Obama was able to get monetary and troop commitments — in the latter case, only for Afghan police and troop training and personnel to help maintain security at the next Afghan elections. No country agreed to send new combat troops, thus leaving American troops (which will number 70,000 there in 2010) to do the fighting and dying. Even at well received public appearances, Obama got negative reactions when he mentioned the Afghan/Pakistan responsibility. French President Sarkozy probably expressed a typical reaction on the issue: He said he found himself completely in agreement with the U.S. strategy in Afghanistan and Pakistan but France, naturellement, would not help with the actual fighting.

Off to the side, Obama met with British, French, German, Russian, Chinese, Czech, and Turkish national leaders, among others, and addressed issues ranging from his attempt to reduce nuclear weapons, worldwide, to problem areas such as the Middle East, Iran, and North Korea, which did a test intercontinental-missile launch while Obama headed home.

The whole week brought Obama a benefit not seen by media and American voters. Preparation for such missions involves days of briefings and absorbing of written materials beforehand. At the meetings themselves Obama not only was immersed first-hand in issues which, previously, he had absorbed only intellectually but had a chance to interact and take the measure of national leaders he had not previously known.

He also got a crash course in realpolitik. No matter what the applications of personal charm, he found, national governments take positions on major issues which they perceive as being in their national interests. Agreements can be reached only when those countries find their interests converging with ours. If they don't want to increase their public spending or send combat troops to Afghanistan, for instance, they won't do it because an American President asks them to join him in arms-over-the-shoulder photo opportunities.

Obama came away from his European mission a wiser and savvier leader.

Meanwhile, at home, there are some parallels between foreign and domestic realpolitik. Before he left for Europe, Obama gave General Motors 60 days and Chrysler 30 days to straighten up or be subject to bankruptcy proceedings. The auto companies want to stay alive, one way or another, but may not be able to do what is asked of them. Obama, by taking ownership of their futures, took a huge political risk. (It would have been easier to let both go into bankruptcy now, saving taxpayer dollars and leaving the White House one step removed from their final fate).

Obama also has taken a huge risk, and probably overreached, by forging forward with expensive new education, health, and energy initiatives while the economy remains down and federal deficits keep mounting.

While Obama was gone, the Congressional Budget Office altered its prior estimate of the ultimate cost to taxpayers of the $700 billion Troubled Asset Relief Program (TARP), estimating that it will be much more expensive than originally thought. The Treasury will recoup some capital it has invested in banks or as it sells loans or securities it has acquired in the financial bailout. In January the CBO estimated that, in the end, taxpayers would recoup all but $189 billion of the $700 billion in the TARP. CBO's most recent estimate was $356 billion. In his recent budget submission Obama estimated that, if Congress approved yet another $750 billion in TARP funds, taxpayers would recoup $500 billion of it. The new CBO numbers indicate the cost to taxpayers would be much larger.

It is against this background that both Senate and House approved last week their revisions of the original Obama budget plan. The Senate approved its budget outline, 55-43. All 41 Republicans voted "no." Democratic Sens. Evan Bayh and Ben Nelson voted with them and Sen. Robert Byrd abstained. The Senate plan projects a $508 billion budget deficit. The House version passed, 233-196, with all Republicans and 20 Democrats voting "no." It projects a $598 billion deficit. Significantly, the House cut $7 billion from Obama's request for non-defense spending; the Senate cut $15 billion.

The budget resolutions are nonbinding and simply set overall parameters for spending. They do not, for instance, offer guidance on how to pay for Obama's proposed health, education, and energy plans. There were several votes taken during the process which demonstrate how difficult it will be to achieve them. For example, Senators voted 67-31 against allowing a "cap-and-trade" bill to pass the Senate with fewer than 60 votes, reflecting skepticism about the proposal's ultimate chances of passage. On another vote, nine Senate Democrats joined Republicans to endorse a nonbinding plan to gut Obama's estate-tax proposals.

The formal 100-day honeymoon period will end in a month. By then, the auto companies' chances will be clearer. We shall see if any of the so-called toxic assets have been purchased at discount from their present owners by other financial entities. It also will be clearer by then just how much money the administration will request for TARP II — especially in light of the new CBO estimates.

Financial markets recently have risen sharply, the sharpest rise in a comparable period since 1933 (when, it should be stressed, they promptly headed downward again). There are signs of economic revival throughout the economy but they have not been reflected in unemployment numbers. Improvements in those numbers always lag by about six months the actual end of recession. So, for now, we can expect them to continue rising.

If a reviving economy does not improve the federal budget picture, Obama's domestic proposals could be stymied for the foreseeable future. Democratic Congressional incumbents fear for their futures in 2010 if the federal budget falls too deeply into the red — and they share blame for it.


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About the Authors & Contributors

Ted Van Dyk

Ted Van Dyk

Ted Van Dyk has been active in national policy and politics since 1961, serving in the White House and State Department and as policy director of several Democratic presidential campaigns. He is author of Heroes, Hacks and Fools and numerous essays in national publications. You can reach him in care of editor@crosscut.com.