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Leader: Barack Obama has a chance to exceed expectations second time around

A second chance.

Although there was no repeat of the euphoria that greeted his victory four years ago, the world still has good reason to be grateful for the re-election of Barack Obama. A win for his Republican opponent, Mitt Romney, would have threatened many of the progressive advances made in Mr Obama’s first term and would have tilted US foreign policy in a potentially dangerous direction. It would have been seen as proof that the US is an essentially conservative country, with the Obama years recorded by history as a mere interregnum in an era of Republican hegemony. By denying Mr Romney victory, Mr Obama has won a second chance to complete economic recovery, to pursue his vision of a fairer, more equal society, to advance peace in the Middle East and to improve US relations with China.

After his re-election in 2004, George W Bush declared, “I earned capital in the campaign, political capital, and now I intend to spend it.” Mr Obama’s decisive victory gives him a similar mandate for change. Unlike Mr Bush in 2004, however, he will be confronting a sharply divided Congress in which the Republicans have retained control of the House of Representatives and the Democrats control of the Senate. The political gridlock that so stymied his first term, especially after the Republican advance in the midterm elections, threatens to thwart his second.

The greatest immediate danger is that Congress will prove incapable of steering the US away from the so-called fiscal cliff, the $607bn worth of tax rises and spending cuts due to come into effect on 1 January 2013. Should the Democrats and the Republicans fail to reach agreement on a less severe austerity programme, the US could suffer a double-dip recession, with grave consequences for the global economy.

The US Congressional Budget Office estimates that the planned fiscal contraction, which, at 4 per cent of gross domestic product, is three times greater than that scheduled by George Osborne next year, would cause the US economy to shrink at an annual rate of 1.3 per cent during the first half of 2013. In addition, it would lead to job losses of over five million by 2014. Already, the fiscal cliff is thought to have reduced GDP by 0.6 per cent this year through its chilling effect on investment. Ben Bernanke, the chairman of the Federal Reserve, whose activist monetary policy has done much to keep recession at bay, has warned, “If the fiscal cliff isn’t addressed, I don’t think our tools are strong enough to offset the effects of a major fiscal shock.” The responsibility for averting economic catastrophe lies with the president and Congress.

Mr Obama has proposed maintaining the Bush-era tax cuts for all Americans earning less than $200,000 ($250,000 for married couples), while allowing taxes to rise for those on incomes above this level. He would seek to achieve $4trn in deficit reduction over the next decade by cutting $2.50 in spending for every dollar in revenue, including using half of the money saved from ending the wars in Iraq and Afghanistan for this purpose.

Yet the Republicans have rejected this balanced approach on the grounds that the top 5 per cent of earners should not be expected to pay more tax, and that defence spending, far from being reduced, should be vastly increased. So fanatical is the GOP, that it has even rejected a 10:1 ratio of spending cuts to tax rises. The likelihood remains that an agreement will be reached but it may yet take a recession to end Republican brinkmanship.

On the economy, as in other areas, Mr Obama must hope that the Republicans, no longer preoccupied with defeating him, will instead seek to work with him. Should they prove willing to do so, there is potential for the president to make progress in those areas where he disappointed during his first term. After Hispanic voters played a central role in his re-election, the president has rightly signalled that immigration reform will be a priority. He has pledged to support an amnesty to 800,000 illegal immigrants brought to the US as children, provided they have graduated from a US high school or have served in the military for at least two years. This measure would, in Mr Obama’s words, “lift the shadow of deportation from these young people” and allow them to apply for work permits. If the Republican Party does not wish to consign itself to permanent opposition (as demographic trends threaten to do), it should support the president.

Freed from the burden of seeking re-election, Mr Obama can devote more attention to foreign policy. The man who spoke inspiringly in 2009 of “America’s commitment to seek the peace and security of a world without nuclear weapons” will aim to reach agreement with Russia on further reductions to nuclear stockpiles. He will end the US’s military presence in Afghanistan and continue its strategic reorientation towards Asia. Above all, he must champion measures to tackle climate change, an issue that was shamefully absent from an often dispiriting campaign. As the damage caused by Hurricane Sandy demonstrated, reducing carbon emissions is not an act of altruism but one of self-interest.

Having fallen short of expectations in his first term, the US president has an opportunity to exceed them in his second term. From the outset, his opponents will seek to dismiss him as a lame-duck president unable to end congressional deadlock. But Mr Obama’s bravura victory speech offered a preview of how he will seek to overcome such obstructionism. “I believe we can seize this future together because we are not as divided as our politics suggests,” he said, in an echo of the rhetoric of 2008. Even after four years of attritional political warfare, the president has not given up on the dream of bipartisanship. Now he must convince others that they shouldn’t, either.