The United States didn’t seek confrontation with Moscow. On the contrary, it cheered when Russians rejected Communism in 1990 and, over the past 25 years, different U.S. administrations tried to help Russia rejoin the community of nations. If Russia were prosperous, strong and self-confident, America would have benefited—just as it did when Germany and Japan became rich democracies after World War II. Ironically, the U.S. economy is now likely to gain from the new Cold War.
Vladimir Putin miscalculated. He gambled that the U.S. would shrug off his annexation of Crimea the way it had Russia’s war against Georgia in August 2008. But the Russian president didn’t take into account the changed dynamics in Washington. Back then, the U.S. was in no position to respond decisively. George W. Bush was a lame duck, limping toward the end of his second term. The presidential campaign was in full swing and the U.S. economy was crumbling; the financial crisis broke out in early September. By the time Barack Obama was inaugurated in January 2009, Russia was completely off America’s radar screen.
On the surface, the U.S. seems even weaker now. Obama’s popularity is consistently low, most recently because of problems with Obamacare. According to Gallup, his 43% approval rating is well below the average for past presidents at the same point of their tenure and close to his own October 2011 nadir. He has barely been able to govern against determined opposition from the Republican-controlled House of Representatives.
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The President’s domestic problems have been compounded by ineffectual foreign policy. A Quinnipiac poll in early April gave him one of the lowest presidential ratings ever on foreign policy, a negative 39-55%. Ukraine now leads the list of voters’ concerns, and 36% believe that Washington’s response to Russia’s actions has not been sufficiently tough.
The Republicans have been attacking Obama’s foreign policy even before the Ukraine crisis. Putin has handed them a perfect stick with which to beat the White House in the run-up to the November mid-term elections. Obama is especially vulnerable on Russia, having launched a “reset” policy in 2009 and having been outwitted by Putin on the issue of Syria’s chemical weapons last year.
Moreover, the Republicans suddenly see a clear path to the White House for a war president, just as Ronald Reagan rode the Iran hostage crisis and the Soviet invasion of Afghanistan in the 1980 election. The Democrats, in turn, are feeling the heat to show some backbone, and they are putting pressure on Obama, as well. Ironically, the Democrats’ dovish reputation in military matters often spurs them into action. All military conflicts of the 20th century except for the First Gulf War were initiated by Democratic presidents.
And then there is the economy.
Even as it completes its fifth straight year, the economic recovery remains sluggish. Weakness has been especially pronounced in the labor market. Only recently has the number of U.S. jobs marched the 116 million mark seen in late 2007. Since that time, the population increased by 15 million. The participation rate, or percentage of working-age Americans working or actively seeking work, declined by three points, from over 66% in 2007 to around 63% now.
The recovery lacks sustainable sources of growth and remains dependent on deficit spending and on the Federal Reserve, which continues to add liquidity to the financial system. Last year, the Fed added a trillion dollars as part of its bond buying program.
Since March 2013, automatic spending cuts, known as the sequester, reduced the Federal budget gap while the Fed, realizing that it can’t go on printing money forever, has started to reduce monetary stimulus. Suddenly, the specter of another downturn, or economic stagnation, emerged, spooking stock investors.