Obama speech ‘pivotal’ to economy, own fortunes

Crises peppering Barack Obama’s presidency have often prompted pundits to decree his job is on the line – but for once the hyperbole may be merited when he unveils his new jobs plan today.

The new employment initiative the US leader will announce to a rare joint session of Congress is crucial both to jolting the economy back to life and to replenishing Obama’s fading political stock ahead of the 2012 election.

The plan will include the injection of $300 billion in the form of tax cuts, infrastructure spending and aid to state and local governments, US media reported late Tuesday. The White House declined to comment on the reports.

CNN and the Bloomberg news service said the injection would be offset by $300 billion in spending cuts as part of a long-term plan to reduce the ballooning US debt, one that Bloomberg said would include revenue increases.

Such a plan would likely meet with stiff resistance from Republicans, however, setting up a potential repeat of the summer’s bitter debt-reduction battle, in which the country came perilously close to a devastating default.

Obama’s brand has been tarnished by a national mood of pessimism percolated from dashed hopes of his 2008 election win and a storm of bad economic news.

The US jobs engine has shuddered to a halt, growth is crawling, deficits and debt cloud Washington’s credit outlook, stock markets are tumbling, consumer confidence has dried up and global contagion is again feared.

The result: amid 9.1 per cent unemployment, polls show Americans are losing trust in Obama’s economic management – just 37 per cent in an NBC/Wall Street Journal poll on Tuesday expressed satisfaction with the president on the economy. And with his re-election bid already firing up and Republicans taking aim, there is little time to get Americans back to work.

“This week’s speech on job creation offers an enormous opportunity to recast the debate and with it the Obama presidency,” said Democratic pollster Celinda Lake, unveiling a new Politico/George Washington University battleground poll.

The Politico poll found 72 per cent of Americans believe their nation is on the wrong track, encapsulating Obama’s 2012 predicament.

However, the survey offered the president a ray of hope, finding that 74 per cent of voters strongly or somewhat approve of their greying leader, suggesting he may just get a hearing today.

Obama faces apparently contradictory problems: an economy stripped of demand which needs stimulating and a bloated deficit choking long-term economic prospects which mandates spending cuts. Most observers believe both threats must be tackled simultaneously. But Washington has choked at this test once before, when Obama and House Speaker John Boehner failed to clinch a “grand bargain” during the rancorous debate on government borrowing in July.

The president insists that any deficit cutting solution should be “balanced” – including a mix of revenues (or tax hikes on the richest Americans) and spending cuts to reduce a deficit projected to hit $1.5 trillion this year.

Republicans who control the House of Representatives however refuse to countenance the kind of investment Obama wants to revive the economy and they also oppose tax rises.

Obama is on dicey political ground because as 2012 looms, there is little sense the economy will significantly improve.

So Obama is under pressure in today’s speech to recast his political narrative, and to offer the optimistic prospect of improvement – even with the limited policy arsenal he has to deploy.