Issue: 461
Sent: 23-11-2011 14:32:04
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Obama Ducks Budget QuestioningA How To Book Of Self Managed Super FundsEmail Marketing For Planners
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Obama Ducks Budget Questioning

Click here to buy - A How To Book of SMSF's by Tony Negline
John Robertson

Having taken 'kissing up' to a US president to new literal and metaphorical heights, Australia's prime minister might have missed the chance to tackle President Obama on the greatest moral challenge facing the world.

There was a time when Australia's left leaning politicians were among the leading sceptics about the value of Australia's relationship with the USA. Arthur Calwell, Jim Cairns, Gough Whitlam, Bob Hawke in his earlier years and, more recently, Mark Latham were critical of the way in which conservative leaning politicians went all the way with the president of the day.

This time round, even the Greens were seen getting cosy with the leader of the free world for their photo opportunity. There was no interjection from Bob Brown when this president was addressing parliamentarians.

Of course, Obama must have thoroughly enjoyed the attention from political leaders and school children alike because such gushing welcomes are well beyond what he can expect on the home front. Obama has been a disappointing president.

Perhaps no-one could have lived up to the expectations created by his soaring rhetoric in the 2008 presidential election campaign and his promise of improved economic outcomes for middle class Americans.

Mainstream Americans are still complaining about the lack of employment growth and the continuing loss of well paid manufacturing jobs. The political rhetoric from all sides is putting this down to China not playing on a level playing field.

One of the motivations for the US president talking tough about China last week was the need to demonstrate to a domestic political constituency that he is prepared to take on the giant. Focusing on China and the Asia Pacific region is also recognition that tying the country to the fortunes of the north Atlantic is going to pay few economic dividends in the years immediately ahead.

Meanwhile, the largest economy in the world has a fiscal imbalance that threatens global living standards. Unlike Greece and Europe, where there are systemic impediments to sound policies, US political leaders appear obstinately opposed to a solution that gives any political advantage to their opponents. Nor do they appear to have an understanding of the impact on the rest of the world of a failure to make a change.

At least two Republican candidates for president are convinced the US should default on its debts, so committed are they to their particular ideological cause. They are helping cultivate the impression among Americans that what could be one of the most catastrophic events in economic history is a legitimate tactical course from which benefits would flow. Some polls have shown a majority of Americans misguidedly in support of a debt default in preference to cutting back expenditure on key social programs.

At the same time as Obama was visiting Australia, yet another deadline for an agreement to reduce the US budget deficit was approaching. After the Congress and the president failed to come up with a deficit reduction plan in August when the proposal to raise the debt ceiling was being debated, a so called super committee was established, comprising leading Republicans and Democrats, charged with finding a way to cut up to $1.2 trillion from the deficit over 10 years.

If the Joint Select Committee on Deficit Reduction cannot come up with an agreed plan, cuts are to become effective automatically across all areas of discretionary spending. This was the disciplining force that was supposed to make a difference.

As negotiators continue to work through the weekend in another act of economic brinkmanship so familiar in Washington, the ideological divide is as stark as ever. Democrats are conceding more on the spending side than they might like but want more taxes on the rich. Republicans contend that the core of the budgetary problem is out of control spending. They would close some tax loopholes but higher taxes overall, especially at a time of weak economic activity, are opposed as risking a more prolonged economic malaise.

Obama who has himself stoked the ideological flames with repeated references to high paid hedge fund managers and corporate jets could easily return to Washington buoyed by a sense that he and Americans are well loved.

In feting the US president so exuberantly, Australia's political leadership has lost the chance to tell him the truth, namely, that the greatest threat Australians face at the present time may not be global terrorism or China but a moral failure among the members of the US political establishment to fulfil their obligations to the rest of world.

Unfortunately, Americans rely too heavily on troop deployments to learn their geography. Australia is facilitating the latest instinctive reaction of American policymakers to use their military muscle, this time to demonstrate an interest in Asia through the deployment of marines in the Northern Territory.

Unless the threat of ever growing budget deficits and periodic debt defaults in the world's largest economy can be eliminated, all the posturing about China and a leadership role in Asia will simply be a costly distraction that is no more substantial than the claim of "Mission Accomplished" by George W. Bush on the USS Abraham Lincoln in 2003.

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