Avoiding a second-rate second term

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Many experts believe a second term is bound to be second-rate but is "second termitis" a real risk or merely an exaggeration? Even the legendary first president, George Washington, encountered numerous obstacles during his second term of office (although he won reelection with 100 percent of the votes). The supporters of the later president Jefferson were often in Washington's way. In addition, he had to pull out all the stops to prevent war with Great Britain, sent troops into Pennsylvania to suppress the Whiskey Rebellion (a tax protest), angry mobs marched on Congress, and his Secretary of State was forced to resign due to a scandal.

This set an ominous precedent for subsequent leaders. No re-elected incumbent did better in his second term than in the first. Seven of them did considerably worse. Their second tenure was dominated by illness, attempts on their lives, corruption, and controversy.

The stats confirm that second terms are often far from successful. Presidential approval ratings tend to nosedive during second terms. Presidents who were re-elected after World War II got more done term in terms of legislation during their initial term. In his first four years as president, by and large Reagan did what he had pledged to do, yet he only made good on 25 percent of his promises during his next term. For Clinton, these percentages were 87 percent and respectively 38 percent.

Obama knows it is not going to be easy. Especially as the last five presidents who were re-elected won more votes the second time round. In four cases, it was a landslide victory. (For instance, Reagan won 49 out of 50 states in 1984). Conversely, Obama was re-elected with a smaller majority.

Obama’s first priority is to address deficit reduction and the fiscal problems. Both Reagan and Clinton were successful in these areas during their second term. So who knows, at least a deal might be in the offing. There may be some fiscal pot-holes in the road in 2013 but for both parties there is too much at stake to allow the economy to smash against the rocks

Apart from the fiscal cliff Obama has his work cut out for him when it comes to gun control, immigration, energy, climate change, and infrastructure. To highlight the importance of the latter: a decade ago the World Economic Forum put the U.S. at no. 5 on the list of countries with the best infrastructure. Since then, America has slipped down to 25th place. In the next five years it will need to spend at least $2,000bn on infrastructure – and that's just for overdue maintenance.

Fortunately, it is not all bad news for Obama. Second-term presidents sometimes do quite well. Eisenhower had a very decent second term and in 1997, Clinton struck a fiscal deal with a Republican-dominated Congress; for the first time in decades the country ended up with a budget surplus.

The Republicans may rule the House of Representatives but they are greatly concerned about their dependence on older white male voters. Demographic trends are forcing the GOP to fundamentally reconsider its standpoints.

In turn, Obama will probably be worried because his predecessors had a far larger majority on re-election. However, precisely this circumstance could help, not hinder, Obama. To quote Lou Cannon, White House journalist and biographer of Reagan (among others), “Landslides are dangerous to the victor.” As mentioned earlier, Reagan only lost one state during the 1984 elections but what followed were the two least successful years of his 16 years in office (including his tenure as Governor of California).

Many re-elected presidents overestimate themselves and want to do too much. Obama’s less impressive victory, in combination with his cool, solid, and cautious personality may mean he is less in danger of overreach.

So both Democrats as well as Republicans need compromises; not least because voters are sick to death of the deep bipartisan divide. This is why some good news may come out of Washington before the year is out. Obama is under a lot of pressure to move his policies forward during 2013. Congress elections are scheduled for 2014; the outcome could stymie his chances of getting things done in the final years of his presidency. In essence, he has two years to focus on the big domestic issues. Subsequently, the president can focus on foreign policy – like virtually all other second-term presidents – and on the consolidation and implementation of domestic reforms that have already been put in place, such as Obamacare.  

Langenkamp is a a political analyst for ECR Research and Interest & Currency Consultants which monitors international political developments that affect the financial markets.