Obama inherits chaotic in-tray brimming with crisis and war

WITH the party over and the bunting cleared away, Barack Obama woke yesterday morning to an unappetising in-tray of problems that need to be confronted as he prepares to enter the White House in January.

Piled high in that tray are an economy in crisis, two wars, and the shrill cries of his supporters for more spending on health, education and just about everything else – along with a few other toxic left-overs from the chaos of George Bush's administration.

"No president since before Barack Obama was born has ascended to the Oval Office confronted by the accumulation of seismic challenges awaiting him," said Peter Baker of the New York Times.

Problem No 1 is an economy tipping into recession and a banking meltdown, the scale of which has yet to become fully apparent.

Fixing this problem will, frankly, depend on how bad it proves to be – and whether the Wall Street bail-out staunches the wound.

Wedged in below the economic mess is the war in Iraq, with a crafty IOU left stapled on the inside cover by the Bush administration, which has funded that war only until January, leaving Mr Obama to find the extra $30 billion (20 billion) to carry it through to the next financial year.

Ending the war, as Mr Obama has promised, will give him a $10 billion dividend – or, rather, it will plug a $10 billion-a-month hole in the public finances.

However, as he acknowledged on the campaign trail, pulling out of Iraq is not so simple. Comparisons between Iraq and Vietnam are often drawn, but the difference is that many Americans still view the remaining terrorists hunkered down in Iraq as a threat to the United States, in ways the Vietcong never were.

Pulling out soon will be doubly difficult because of the Bush administration's "surge" strategy.

For all the boasts of the generals about how the introduction of extra American troops quelled the rebellion, the real mechanism for peace was been Washington's decision to put Sunni Muslim insurgent groups on the payroll.

Only in October did the payment of these groups finally become the responsibility of the Shia Muslim-dominated government in Baghdad – and that government views the fighters with suspicion – as a new Sunni insurgency in waiting. There could yet be a flare-up in violence.

Then there is Afghanistan – a war that Mr Obama has made a foreign policy priority by promising more diplomatic and economic aid to go with the military deployments.

But here, too, there is neither an obvious winning strategy, nor an obvious exit strategy: the Taleban is enriched by a $3 billion heroin industry and will not easily be bought off.

And then there is Nato. Mr Obama's first overseas trips and his appearance at the United Nations will be rock-star-style events, but London, Paris and Berlin will have hard questions beyond the razzmatazz.

Firstly, if Nato is to commit itself to the war in Afghanistan, will it have more say in how that war is to be conducted?

Secondly, if Mr Obama strengthens support for the alliance and western Europe, will that be at the expense of sparking a confrontation with a newly resurgent Russia?

Further down the president-elect's in-tray are the long list of promises Mr Obama has made, to just about everyone, to spend more on healthcare, on universal insurance for children, on education, on roads, bridges and power plants.

The national debt and the looming recession means there will simply not be the cash to fund all these projects – yet whichever ones are dropped will bring howls of protests from sections of his support.

As he fights through this mountain of immediate issues, will he find the time to get to the bottom of the pile, to the more far-sighted plans he hopes to bring to fruition?

The president-elect has set his sights on supporting, rather than opposing, the outside world's call for tougher rules on carbon emissions – but would the cautious and methodical Mr Obama have the stomach, while dealing with all these other crises, to take on the powerful oil and coal lobby?

One early casualty could be his tax plan. The first part, about ending the Bush tax cuts for the top 5 per cent of the population, will be performed early and with a flourish. But how much money he finds in the kitty to give his promised tax rebates to the remaining 95 per cent is unclear.

All of these issues point to the great unknown of Mr Obama – what style of leader will he be?

He ran his election campaign with a cool, methodical, tight-buttoned discipline, rarely diverging from the script and with great caution. The style may prove to be the same once Mr Obama is in the White House, possibly seeing his administration labelled as too anxious and risk-adverse for the challenges that lie ahead.

Lacking experience in either business or executive office, Mr Obama may not yet know how he will approach problems, handle criticism, and somehow keep his strategic goals in sight through the thickets of day-to-day upheavals.

Like the rest of America, and the outside world, he himself may have to wait and see.

ECONOMY: Damned if he does, damned if he doesn't amid downturn

BILL Clinton steered his way to the White House in 1992 by putting a sign in his campaign office saying "It's the Economy, Stupid" – and what was true for him is doubly true for Barack Obama as he prepares to take the reigns of power.

But unlike Mr Clinton, the president-elect does not have the luxury of inheriting an economy on the verge of a record-breaking boom.

Instead, the Wall Street meltdown has left it not just in chaos, but with nobody even sure of how deep the damage goes.

Perhaps the near-collapse of the banking system was a violent correction, and one that can be stanched with the present $700 billion (440 billion) bail-out plan, coupled with tighter regulations to rein in profligate bankers.

But even if that proves to be the case, the Obama administration must face the problem of paying for the promised "change" with a ballooning national debt and a looming recession.

Recession will cut tax revenues and put new strains on the budget for welfare services as more and more Americans lose their jobs and homes.

There is also the small matter of reconfiguring the banking system so that speculation cannot again drive the economy into a ditch, while avoiding the kind of straitjacket that will strangle what is left of growth.

And Mr Obama knows that fixing the United States means fixing the world.

In July 1944, the then president, Franklin D Roosevelt, met his Second World War allies at Bretton Woods, New Hampshire, to set in place an international finance network using the IMF and World Bank as correction devices to stop a repeat of the Great Depression.

Those two institutions, along with the G8, have been sidelined by changes in global wealth, not least the rise of China and Russia, both of whom see wealth as an instrument of state power, a view not easily squared with the rules-based commitment to the free market envisaged at Bretton Woods.

Mr Obama has the intelligence, and for the moment the political capital, to call for new global regulations, but whether the rich will want to pick up the tab for giving help to the poor is unclear.

Closer to home, Mr Obama must square his support for free trade with calls for "protectionism lite" – a demand that the US gives unlimited market access only to states that have similar labour laws, and thus labour costs, to the US.

For workers dismayed by the relocation of manufacturing jobs to Asia and South America, this is a popular step. Like the unions, US business owners will also feel happier competing to sell cars and training shoes with European firms than with Chinese ones that pay their staff a dollar a day.

But such a two-tier economic system, with poorer nations also excluded, will be unworkable if the US intends to stay within the mechanism of the World Trade Organisation.

And with the rest of the world scheduled to follow the US into recession, other nations will not easily give up their existing trade rights without a fight.

For Mr Obama – and for the rest of the world – the problem will come down to one of leadership: will he emerge as the kind of gutsy leader ready to push through unpopular measures to keep in line with his strategic mission?

Or will he endlessly buckle and amend his plans in the face of what is likely to be a storm of resistance – from the outside world if he embraces protectionism, from American voters if he does not?

HEALTH: Dying mother inspired new medical cover

Mr OBAMA has pledged to make healthcare insurance affordable and accessible to all in a country where 45.7 million – 15.3 per cent of the population – currently have no cover.

He has promised to lower healthcare costs by $2,500 (1,600) a year for a typical family by investing in information technology, prevention and care co-ordination. He also plans to create a National Health Insurance Exchange with a range of private insurance options, as well as a new public plan to allow individuals and small businesses to buy affordable health cover.

He plans to fund his sweeping $50 to $65 billion (32 to 41 billion) healthcare reforms by rolling back tax cuts President Bush granted to Americans earning over $250,000 (158,000) a year, and maintaining estate tax at its 2009 level.

On the campaign trail, the Democrat often described how his 53-year-old mother battled with insurance firms over her healthcare cover as she lay dying from cancer in hospital.

WORLD: Restoring global influence won't be easy

BARACK Obama's biggest foreign policy challenge is restoring America's battered world standing. Eight years ago, much of the globe looked to the United States for leadership. Today, it is increasingly seen as a nation in decline..

The president-elect will have no trouble making the US more popular than it has been under George Bush. He will have a harder task restoring US power and influence.

His changes will include globally popular choices such as a phased withdrawal of combat troops from Iraq and strong action on climate change.

He suggests he would permit direct diplomatic contacts with Iran, has said he is open to a meeting with the Cuban leader, Raul Castro, without preconditions, and is expected to send envoys to North Korea.

He has already made strides in mending frayed transatlantic ties. His trip over here this summer sent a strong signal he hopes to engage Europe as a partner – not treat it as a rival or a lackey.

IRAQ: He'll honour pledge to pull out troops

DURING the election campaign, Mr Obama said repeatedly he would withdraw US troops from Iraq "within 16 months" of taking office.

Events there have made it easier for Mr Obama and Iraqi officials to find common ground for systematically withdrawing the US force – currently 151,000 troops – without risking a sudden plunge into chaos or a political battle in Washington and Baghdad.

US and Iraqi negotiators have hammered out an agreement that would remove US soldiers from Iraq's cities by 30 June, with the last troops leaving the country by 2012.

That agreement still must be approved by Iraq's parliament by the end of the year when the UN mandate expires. The draft document has drawn strong opposition inside Iraq, but government officials still are hopeful that parliament can approve the pact before the deadline.

That would largely satisfy both Mr Obama's pledge – and the Iraqi goal – of an orderly end to the US mission. "Obama has to deal with Iraq's issues in a positive way and have a sense of responsibility to correct the situation in Iraq, as well the situation inside America," said Salim Abdullah, spokesman of the largest Sunni bloc in parliament.

AFGHANISTAN: Toughest strategic call on front-line against terror

THE single most important foreign policy issue facing President-elect Obama is Afghanistan, more accurately described as the Afghan/Pakistan conflict.

Mr Obama has made clear he regards Afghanistan as the "right" war in the fight to prevent another 9/11.

Yet he is inheriting a venomously complex situation that has left an estimated 4,000 dead this year alone.

Eight years after the US invasion of Afghanistan, the country has changed little. Indeed, the Taleban seems to be in a stronger position now than at any time since it was removed from power in 2001, helped in large part by chronic instability in nuclear-armed Pakistan.

Thousands of fighters have headed from safe tribal havens in Pakistan's rugged border region, where Islamabad's writ does not run, to fight with US, British and allied forces in the neighbouring country.

Western forces currently deployed in Afghanistan – including some 8,000 British soldiers – can hold their own against the insurgents, but they are involved in a war of political attrition.

Already Canada, whose armed forces have borne much of the hard fighting in the country, have set an end date of 2011 for withdrawal. Other countries may follow – and the Taleban knows this. It doesn't have to win, it just must not lose.

For the Afghan population, the situation remains in the balance and while the Kabul government is a long way away for many, and an abstract, corrupt concept at best, the Taleban is frequently in the middle of their communities – whether those communities like it or not.

Mr Obama received a harsh reminder of the difficulties he faced yesterday, as a visibly angered Afghan president, Hamid Karzai, demanded the US president-elect put a stop to civilian casualties. This followed reports that a US air strike may have killed dozens of Afghans attending a wedding party in the south of the country.

Scores of Afghan civilians have been killed in a string of misdirected US air strikes this year. Mr Karzai said the issue was the biggest source of tension with his US backers.

The perception that western troops do not take enough care to avoid killing civilians has added to resentment felt by many Afghans at foreign forces' presence, ongoing insecurity and the lack of improvements in living standards.

One of Mr Obama's senior aides, Frances Fragus Townsend, a former Homeland Security adviser, outlined some of the incoming administration's concerns, especially about the potential for conflict to create "spin-off" operations linked to global terrorism.

He said: "The most immediate counter-terrorism issue is the Pakistan tribal region; it represents the greatest threat to American security interests."

Mr Obama will undoubtedly order an increased US troop deployment to Afghanistan and almost certainly allow the continuation of cross-border airstrikes into Pakistani tribal areas by drone aircraft.

His most likely move on from the current US strategy will be similar to that latterly tried successfully by the Bush administration in Iraq – paying local forces to fight the Taleban.

That, and a more open policy with the new government of Pakistan might just work.

Afghanistan might be the right war, but its resolution will require much of the young president-elect's attention.

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