The collapsing US economy has forced Barack Obama into an extraordinary balancing act. He has to tell the public that the crisis is going to get worse, so that when he seeks re-election in 2012 he is not open to charges of having failed to provide warnings. But he cannot raise the alarm too loudly for fear of creating panic and undermining an early restoration of economic confidence.
When presidential campaigning began in 2007, there was a near consensus that the dominant issue of the election and for the new administration would be Iraq. Today, Iraq is barely mentioned, under review with a host of other issues: Iran, Israel-Palestine, Afghanistan-Pakistan and Guantánamo.
Instead, there has hardly been a day since Obama took over when he or a member of his administration has not made a speech or given a press conference about the state of the once-mighty US economy. This week alone, Obama’s schedule was: Monday, a White House summit on the national deficit; Tuesday, a prime-time television address to Congress, in effect the state of the union, devoted mainly to the economy; on Thursday, his first budget.
Almost daily there is more bad news, as another company sheds jobs and the number of people failing to keep up with mortgage payments mounts. The dispossessed head for rentals and trailer parks, and neighbourhoods decline. Car giants such as Chrysler and General Motors, close to closure, come to Washington to beg for tens of billions in aid.
At least two major banks, Citibank and the Bank of America, are on the verge of collapse, and the word "nationalisation", still a term of contempt in much of the US, has become fashionable. When even Alan Greenspan, appointed chairman of the Federal Reserve by Ronald Reagan and one of the biggest opponents of regulation, tentatively backs bank nationalisation, there is no longer any doubt about the scale of the crisis.
In the months between his November election victory and the 20 January inauguration, Obama spoke about the billions that would have to be spent to try to halt - and, hopefully, reverse - the economic slide. The sums at the time seemed staggering. Since then the figures have multiplied.
On 17 February, Obama signed into law his $787bn economic stimulus plan, describing it as the biggest spending plan in US history. Comparable to Roosevelt’s New Deal, the package aims to save or create 3.5m jobs, mainly through a series of infrastructure projects that include new roads, bridges, schools sewerage works and water supplies.
The legislation also includes improved unemployment benefits, financial help for the poor and a start on reform of the health service. There are various "green" incentives aimed at encouraging alternative energy sources and more efficient fuel use. And there are tax cuts, intended to win Republican support in Congress, though this was a futile gesture. On top of the $787bn, Obama is to spend a further $275bn to help struggling homeowners. There are also bank bail-outs, car industry bail-outs and as yet unknown bail-outs.
It is feasible that Obama’s strategy might work. The sudden injection of so much cash could see confidence seep back among homeowners, the banks might begin to loosen credit, people might start spending again. But it is hard to find such optimists in Washington and economists said it was much too little. If the $787bn stimulus fails to make an impression, just as George Bush’s more modest effort last year had minimal impact, Obama will have to go back to Congress for hundreds of billions more.
That is the spending side. The deficit is just as bad. Obama inherited a staggering deficit of $1.2 trillion from Bush and, with his own stimulus package and other spending, he anticipates that will rise to $1.5tn next year, though economists are predicting it could be closer to $1.8tn or $1.9tn.
In an astonishing calculation that would make him the superman politician so many of his supporters expect, Obama predicts that he can both have a spending spree and cut this deficit back, by the end of his four years in office, to $533bn.
For Obama to make such a prediction - one that his Republican opponent may taunt him with in the 2012 presidential race - risks him becoming a hostage to fortune. It is hard to see how a reduction to that $533bn figure can be achieved, unless the economy were to begin spectacularly turning either later this year or early next. And even if it did it would still be difficult for the US to achieve.
Obama has begun his presidency with confidence, getting the stimulus package into law in record time for such a complex and contentious piece of legislation. Polls give him high approval ratings. But if the economy continues to spiral downwards and Obama’s initiatives prove ineffective, the public mood is likely to shift. Bush’s role in the crisis will be largely forgotten and it will be Obama who takes the blame.