What's next after Obama's re-election?

By Jin Canrong
0 Comment(s)Print E-mail China.org.cn, December 1, 2012
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Jin Canrong is a professor and Associate Dean with the School of International Studies at Renmin University of China. [File photo]

Jin Canrong is a professor and Associate Dean with the School of International Studies at Renmin University of China. [File photo]

U.S. focus: Middle East or China?

Guancha.cn: What adjustments will Obama make in foreign policies in his second presidential term? What impact will it have on China?

Jin Canrong: The external environment might necessitate Obama to deviate from what he intends to do. In the last two years of his first term, Obama wanted to focus on deal with China's rise in the Asia-Pacific region. However, the situation in the Middle East became increasingly grim in the past two years. Especially Iran; from the viewpoint of the United States and Israel, Iran's nuclear program could reach a critical point next year. If Obama cannot withstand the pressure by then, he may make some moves. Since Iran and Syria issues are closely connected, this could result in an accelerated solution of the Syria issue.

It also upset the U.S. that the Islamists, instead of the liberals whom the U.S. likes more, enjoyed the fruits of victory after the Arab Spring.

Therefore, Obama has been forced to turn his attention to the Middle East region. He is clear that although the Middle East issues are pressing, a rising China is a much more crucial issue to deal with. In either case, the development of these issues is beyond his control.

Guancha.cn: If the U.S. has to continue dealing with the tension in the Middle East region, will China win another development opportunity as was seen between 2001 and 2008?

Jin: It's possible, but seems unlikely. The Middle East issue is troubling for the U.S. but not as severe as the 9/11 terrorist attacks, which posed a major threat to the U.S. Therefore, the Middle East issue will consume energy, but will not result in a complete overturn of the U.S.'s strategy.

That is, the Middle East issue will distract the U.S., but will not hold back its steps to return to the Asia-Pacific and contain a rising China.

Multiple moves to reduce deficit

Guancha.cn: The U.S.'s national debt saw its biggest annual growth during Obama's first term. Currently, the country is again facing a fiscal crisis. However, Obama is bound to pursue continued reform of social welfare policies including health care during his second term. Can he get enough funding within the existing framework? How can he solve the fiscal crisis now?

Jin: I wouldn't worry about the fiscal cliff because at the end of the day the Democrats and Republicans will come to terms. If they fail to reach an agreement, as US media has predicted, the US government will shut down and 200 million people will have no job. No one can afford this outcome. However, a compromise will only put off dealing with the problem, not solve it. For example, it's highly likely that the two parties will delay the financial cliff by increasing the debt ceiling from US$16.4 trillion to US$17.4 trillion. In a word, the Democrats and the Republicans will keep arguing with each other about the debt crisis and will always reach an agreement, but they cannot solve the problem for good.

In my opinion, the U.S. will take multiple moves to deal with its financial problems. First of all, they will intentionally devalue the dollar and stimulate inflation in an effort to reduce both internal and external debt. Secondly, they will actively encourage innovation such as shale gas exploitation, which also helps solve the problem. They will probably also choose to exploit other countries' resources, like they have with Libya. Lastly, they may continue to reduce people's incomes [through raising taxes]. US people's incomes are already at the lowest level since the 1990's.

Of all these solutions, innovation is the best one. It's followed by diluting the dollar and creating inflation and currency devaluation, which leaves the rest of the world, including China, to pay for its debt. Lowering people's take-home pay means that the US middle class will pay the bill, while starting a war means the affected country will pay the debt. The U.S. is looking at a gigantic debt at present ― not just the federal government, but also local governments and big corporations. The US debt totals approximately US$70 billion, five times its GDP, which cannot be solved right away. I think the U.S. will take various measures, both legal and illegal, to deal with the debt. But this is not something Obama can solve during his term.

In four years, when Obama leaves office, I estimate the US national debt will amount to US$20 trillion, far exceeding its GDP. The problem will be left to his successor.

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