Inside Story

By Dr Lesley Russell

AFTER Julia Gillard met Barack Obama in Washington a couple of weeks ago, they revealed that they'd discussed Libya, Egypt, trade, Afghanistan, climate change and regional security – and the merits of Vegemite. We'll never know if they also confided in each other about the ongoing consequences of bad polls and partisan politics. Perhaps they exchanged stories about opposition parties that deny the science of climate change and can offer no viable alternatives to healthcare reform. While they tossed around an Aussie rules football in the Oval Office, did they also toss around ideas for boosting the economy, protecting labour rights and closing the growing gap of disadvantage in both countries?

In her speech to the joint session of the United States Congress, the prime minister called on America to "be worthy to your best traditions. Be bold." She was talking not just about international security, but also about economic reform, including tackling emissions growth, investing in education and expanding the job market through free trade.

While the fundamentals that underpin the Australian–American alliance remain sound and independent of the parties in power, the recent ascendency of the right in the United States is set to change the country in ways that will make it more inward-looking, less competitive and less optimistic. Some of this is an inevitable consequence of high unemployment and massive government and personal debt. But most of it is about the political philosophy and the lack of vision that newly elected Republicans are bringing to the Congress and to state legislatures.

Led by the Republican governor of Wisconsin, Scott Walker, some of the "red" states are dealing with their huge budget deficit problems not only by dramatically cutting programs and public sector jobs, but also by seeking to revoke the collective bargaining rights of public unions. The closest Australian parallel would be if John Howard had attempted to extend the waterfront reforms of 1997 to the public sector unions in Australia.

The jobs that will disappear are those of teachers, firefighters, policemen and health workers. Schools are closing, health services are being slashed, college tuition assistance is disappearing and local infrastructure investment is being cut, even as these same states are providing a slew of tax cuts to big business. In states like Michigan, Georgia and Ohio these tax cuts will actually cause the budget deficits to grow, despite the huge hits taken by the public sector.

Such actions fly in the face of all the evidence. These are essential community services; the people who deliver them are not especially well paid (although they do have better benefits than average); the unions they belong to advocate not just for members' benefits but also for smaller class sizes, better occupational health and safety rules, and more protective equipment; children still need to be educated; people will still get sick; and there is no evidence that giving tax breaks to corporations improves the unemployment figures.

Meanwhile, the nation is struggling to educate and train the workers needed for the jobs of the twenty-first century. The number of people who have fallen through the holes in the ragged safety net of public services is growing rapidly. Unemployment and underemployment rates are high, real wages have not increased in a decade, and forty-four million Americans – including one-fifth of all children – live in poverty. The figures are worse for African Americans and Hispanics.

To the chagrin of Republican lawmakers, many Americans have decided that they don't want to live in a country where children are growing up in the most unequal era since the 1920s and their labour rights are being destroyed. Across the country, people are fighting back, with protest marches and sit-ins that have brought some legislatures to a halt.

The myopia and partisanship are arguably worse at the federal level and consequently there are some tough fights ahead in the Congress on budget issues. The Obama administration released its 2011–12 budget last month, even as Congress continues to grapple with funding for the remainder of the fiscal year 2010–11, which ends in October. The 2012 budget makes key investments in infrastructure, scientific research, education and job creation, while still reducing the deficit. "Even as we cut out things that we can afford to do without, we have a responsibility to invest in those areas that will have the biggest impact in our future," President Obama said.

Of course, Congressional Republicans immediately criticised the administration for not proposing enough in the way of budget cuts. "It's going to destroy jobs because it spends too much, it borrows too much, and it increases the deficit," responded House Speaker John Boehner. But while the GOP is accusing the administration of budget policies that will cause unemployment to rise, House Republicans have voted on a spending plan for the remainder of this budget year that, if enacted, would result in deep cuts to vital programs that help some of the nation's most vulnerable people and the loss of one million jobs. In addition, they have sought to defund the implementation of healthcare reform and take away many new healthcare benefits from American families, while retaining those same benefits and rights for themselves.

This will all come to a head very soon over the debt ceiling. The authorised level of public debt will be exceeded by 1 May, and a Congressional vote is needed to raise it. This will pit Obama's approach (cut intelligently, invest in the future) against the Republicans' (slash and burn, let the private sector take care of jobs). The outcome is not a sure bet. The Republican leaders say we're broke and we must cut to recover, and if that costs jobs – well, it's the president who gets the blame on unemployment. Americans believe that rhetoric, until the cuts affect their lives. The president and his team will need to play the ball and leave the opposition flailing – and still have the spectators on their side.

And just as the United States is progressing inexorably towards a massive budget showdown, possibly even a government shutdown, so too is the nation headed to a presidential election. Would it be too cynical to suggest that Republicans intent on taking over the White House in 2012 have no incentive to tackle these issues but would rather let it all fester on Obama's watch?

America's prosperity over the latter half of the last century was the consequence of major investments made in the 1950s and 1960s, including the interstate highway system, a public education system that was the envy of the world, and massive funding for science and technology. Where are today's investments that will create the next generation of growth for our children and grandchildren and sustain Julia Gillard's belief that Americans can do anything?

Lesley Russell is a research associate at the US Studies Centre.