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Credit downgrade: Obama under fire

business Updated: Aug 08, 2011 00:08 IST
Highlight Story

Outside the Aragon ballroom in the north Chicago neighbourhood of Uptown, little sign remained of the president's 50th birthday party.

The night before, 2,000 well-wishers had crammed inside the beautiful old building to mark Barack Obama's half-century. They had partied and danced as R&B singer Jennifer Hudson crooned "Happy Birthday".

But now, only one forlorn birthday banner still hung from a local bar. The party was truly over. As unwelcome late birthday presents go, the dramatic downgrading of America's debt rating by Standard & Poor's was hard to beat.

The news sent reverberations through US politics, triggered an ugly blame game and plunged the economy into a fresh crisis that looks set to reverberate all the way to next year's presidential election.

On the streets of Uptown the mood was bleak. "The entire political culture has just stopped working. It feels like it is broken," said local IT worker Christian Lindemer.

His critics might say the same of the Obama White House. It has certainly become a place under siege. On the right it faces implacable foes in the shape of an ultra-conservative Republican party that has danced nimbly around Obama's efforts to work with it.

Tea Party defenders shrug off the idea that its extremism helped to cause S&P's action and put the blame for the downgrade firmly on Obama's shoulders.

"President Obama is destroying the foundations of our economy one beam at a time," said Tea Party-backed presidential candidate Michele Bachmann as the news broke.

On the left, Obama faces a liberal base depressed by what it sees as the president's continual concessions to Republicans. It blames the Tea Party's intransigence over the debt ceiling for the political deadlock that led to the downgrade.

Republicans were "antediluvian" wrote online Slate magazine columnist Jacob Weisberg. Even vice-president Joe Biden, in private meetings with Democrat leaders, has reportedly said they "acted like terrorists".

But now Obama's biggest enemy of all lies outside politics: it is the economy itself. The historic S&P's downgrade came after a week of terrifying market swings and amid the promise of vicious cuts to US's already shaky welfare state. It is now clear that the US economy is terribly sick. It is failing to create jobs and might double-dip back into recession. The stock market is tumbling. No wonder that Obama's birthday celebrations were so brief.

He flew in and out of Chicago on the same day. Yet, perhaps, he got a little lift from being in a town where sympathy for its favourite political son remains relatively strong. "He's trying his best. Or at least I think he is," said Lindemer.

But in the wider landscape of US politics there is no denying the anger among some leading lights of the left at Obama, which the debt downgrade will only sharpen. After all, last week's debt deal - so hated by liberals - was meant to avoid precisely such a fiasco.

After having initially promised tax rises for the rich to go alongside deep spending cuts, Obama ended up signing a debt agreement with Republicans that contained no new revenues. Not a single cent would come from US's wealthiest while a burden of hundreds of billions of dollars of cuts would be borne by some of the poorest.

It was billed as tough but necessary medicine in order to raise the debt ceiling and stave off disaster. But, having swallowed the pill, US got downgraded anyway and the markets still fell.