The Australian

by Geoffrey Garrett

Barack Obama's State of the Union speech lacked the fireworks of the pitched battle between Newt Gingrich and Mitt Romney for the Republican presidential nomination. The speech nonetheless revealed the path he hopes will take him to re-election.

America's post-GFC anaemic economic recovery and rising debt and deficit mountains should make Obama a long shot in November. But today he is probably a slight favourite, and firming. This is partly because the economic news has turned slightly positive though still vulnerable to more bad news from European or an Iranian crisis.

But his improving re-election prospects have at least as much to do with his would-be opponents. Not only have the Republicans been unable to come up with a consensus candidate to unite their party and focus squarely on the President's very real liabilities, but the Gingrich-Romney battle is actually helping Obama because it is giving him all the ammunition he needs to expose the deep flaws in the Republican pretenders to his throne.

The rise of the Tea Party and Occupy Wall Street from either end of the political spectrum both reveals how much of America is angry at what people see as a Washington-Wall Street elite cabal responsible for and not doing nearly enough to end the country's deepest and longest downturn since the Depression. Obama should be first in the firing line. But Gingrich, the cynical lobbyist, and Romney, the callous banker, are also easy targets, as the two Republican challengers continue to point out with increasing vitriol.

This helps explain why Obama spent so little of his State of the Union address trying to defend his mixed record in office under normal circumstances, his cardinal re-election liability. Instead, Obama focused on the future, and played an unusual "fairness" card.

Americans typically talk of equality of opportunity. Equality of outcomes is a too European nono. But the President clearly thinks this year is different, and he is using language more like Rudd-Gillard Labor than Bill Clinton's Democrats or indeed Obama's own 2008 post partisanship.

Obama said his No 1 priority was to "restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules". Then he mentioned one specific example: "If you make more than $1 million a year, you should not pay less than 30 per cent in taxes."

Hours before Obama spoke, of course, Romney revealed that he had paid 15 per cent tax on his 8US20m-plus incomes in the past two years; investing, not working for it.

Romney said he should not pay a cent more in tax than the law demanded of him. Obama doesn't even have to utter the rhetorical question: how fair is that?

Gingrich is in no better shape when it comes to post-GFC fairness. But instead of an outsized Wall Street income and undersized taxation, Gingrich's problem is influence peddling among the Washington elite on the worst of all post-GFC policy areas, housing. In a Florida debate last Monday night, Romney attacked Gingrich mercilessly for taking $US1.6m ($1.5m) in fees from Freddy Mac, apart public, part private mortgage company at the centre of the spectacular bursting of the US housing bubble since 2006. Gingrich insisted Freddy paid him all that money to be "a historian". Romney said Gingrich could only have been paid this much by Freddy's chief lobbyist to peddle influence inside the beltway. Somewhere, Obama was smiling.

Obama knows attacking Gingrich or Romney on fairness grounds will be labelled class warfare by Republicans. But he had a snappy rejoinder: "You can call this class warfare all you want ... most Americans would call it common sense."

Most political science models would say the 2012 election should be a referendum on the Obama administration's economic record the President would have little chance of winning.

With unemployment mired above 8 per cent, housing prices 30 per cent lower than before the GFC and 30 per cent of Americans underwater on their mortgages, Obama's only defence would have been "without me, it would have been even worse". Defending dire outcomes with cataclysmic counter-factuals is a near impossibility in politics.

But the Gingrich-Romney arms race is threatening to up-end the conventional story. The longer it goes, the better for Obama. And when the Republicans finally have their nominee, Obama will be ready, with lines of attack the Republicans have already given him. Obama's always unlikely re-election is looking ever more plausible.