James Anderson writes from Washington: President Barack Obama is angry. He is furious that the Republicans will not do any deals with him in Congress. The Democrats have a small majority in the Senate but that may disappear at the next round of elections. The President, if re-elected in November, faces the bleak prospect of dealing with a Congress that will be wishing him to fail in every attempt to pass legislation. So gridlock will be the order of the day in Washington. And that spells trouble for the political establishment in Washington as the country struggles to get out of the economic mess.

The world, or at least the democratic part of it, looks to America for leadership. There will be no US initiatives in foreign policy this year as it is election year. All the key issues concern domestic policy. So the rest of the world had better get used to the idea that America will not lead. The perception in Beijing and Moscow is that the United States is a declining power and is losing its appetite to lead. They hope to fill the vacuum.

So the presidential race this year will be the dirtiest ever. That is saying something. Politicians can accuse their opponents of anything without risking being sued for libel. It is all part of the political game and better to wash one’s dirty linen in public before taking office. The President is good at vitriolic asides. One advert shows the Republicans pushing granny off the cliff top. The message is clear. Vote Republican and you could die of neglect. Obama’s economic record is so appalling that he dare not boast of raising living standards even for the poorest. There are 47 million Americans on food stamps and the number is increasing by the day. Tell them that Mitt Romney will gradually phase out their stamps and the President has the votes of everyone on welfare. It matters not a whit that this is not true. The level of debate is that of the school playground. Invent accusations and force your opponent to disprove them. How do you disprove a negative?

So Washington politics has become a big turn off for most Americans. What is the alternative? Local politics. With the President unable to pass any significant economic legislation – the demand is that for every new dollar spent a dollar is taken off government spending elsewhere – it is up to the states to devise ways of solving their own economic problems. Roosevelt’s New Deal, which saved capitalism in the 1930s, cannot be imitated. Republicans would fear that it would make the Democrats too popular. There is also the point that the federal budget could not afford such largesse. The money would have to be printed.

Some states are doing well at present such as North Carolina and North Dakota. Their newfound wealth is based on what is under the soil: shale gas and oil. Wisconsin has broken the trade union stranglehold on hiring and firing. One can choose now to join a union or not. Texas is attracting workers from states such as California.

The federal budget transfers resources to states which are in financial difficulty. A city can go bankrupt but not a state. This ensures that the per capita income gap between states in America is modest. So far the richer states have tolerated transferring some of their income to less well run states. Will this continue? Will a division between Republican governed states and Democrat run states emerge? One can see a situation arising where a successful Republican state will demand that a profligate spending Democrat state put its house in order before it gets extra funding.

The weakness of the federal government strengthens state government. It is now incumbent on every state to promote economic growth and not to expect large handouts from Washington. Americans are living beyond their means. A 20 per cent cut in living standards is needed to escape from their mountain of debt. However some states, back to North Carolina and North Dakota again, are exceptions. Their living standards will continue to rise. These states will put their interests ahead of federal interests. Just another problem for the next President to solve. And the best of luck to him.

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