The social and economic problems of the US will continue to burden and even block the political system to such an extent that the outcome of the elections is really of minor significance. No matter if Obama or Romney wins, the future president of the US will be severely restricted in his capacity to act on domestic as well as foreign policy issues. This is due to the Congressional elections being at least as important as the presidential elections: 435 representatives of the House of Representatives and one third of the 100-member Senate stand for re-election every two years, also on November 6.
Gridlock
In all probability, the elections 2012 will once again result in a “divided government” constellation, which means that the party of the successful presidential candidate will not have the majority in Congress, the “other branch of government.” At least one chamber of the legislature, either the Senate or the House of Representatives, will block the initiatives of the Oval Office incumbent following the elections.
The American Congress does not automatically adopt the political agenda of the executive, i.e. the president, even in the case of a so-called united government when White House and Capitol Hill are governed by the same party. The reason for this is that political parties play a minor role in the US – except during elections. During legislative contention, US parties do not have the resources and sanction mechanisms to shape the legislative process. Both President George W. Bush and President Obama faced serious opposition, even from fellow party members, when maneuvering legislative initiatives through Congress. The next holder of the office will also be severely restricted in his capacity to act by the blocking power of Congress – especially by the budget appropriation power, the so-called power of the purse.
The opposition parties’ incapacity to act as a consequence of the continuous blockades compels the Federal Reserve to act instead. The Federal Reserve is still attempting to revive the US economy with liquidity injections. Their success or failure will also determine the economic growth in Europe – and, therefore, also have a sustained impact on our political and economic decision-making process.
How Are We Affected?
Germany will be heavily affected if the economic and purchasing power of the US collapses. Even today, it is clear that Europe can no longer rely on the US as driver of consumption. The spending power of the Americans could, in future, also be reduced by currency issues: if the value of the dollar drops significantly in the medium or long term, this will push up the value of the euro and make European exports more expensive. German entrepreneurs have begun dealing with this issue by relocating segments of their production to the US.
There is another advantage to relocating: due to the continuing economic crisis and the increasingly competitive global economy, there is also a growing fear in the US concerning job losses. This will lead to increased pressure on the representatives and senators in the US Congress to embrace protectionist measures. The “Buy American” provisions in the US economic stimulus package, which can be interpreted generously in favor of American competitors, are an early indication of upcoming problems. The public, made uneasy by the economic problems, and their representatives in Congress as well as well established interest groups will make it difficult for the next US president to advance free trade policies.