Barack Obama this week pulled off a remarkable victory. The American economy is recovering at a pace most voters regard as unacceptable, and just over half believe that the country is on the wrong track. The President campaigned with an approval rating below 50 per cent and unemployment above 8 per cent. Historically, these factors have combined to ensure defeat for any sitting president. But as Obama reminds us now and again, he is in the business of changing history.

He has again demonstrated that he can inspire people — even the British — in a way that other world leaders can only dream of. His extraordinary personal appeal has trumped the paucity of his achievements. Much of it lies in what he embodies, and his re-election certainly makes life easier for America’s friends abroad. Anti-Americanism is one of the most pernicious forces in world affairs, and it is far harder to hate America with Obama and his young family in the White House. For those who do not have to pay his taxes, he remains the ideal American president.

But let us not pretend that he has won an emphatic endorsement. The race was conducted on a knife-edge and had a few thousand people voted the other way then Mitt Romney would have been in the White House. Obama was blessed with a uninspiring challenger, who failed even to take states like Nevada and Virginia, which have Republican governors. Conservatives can claim to have won one argument: the polls show that even in swing states, most voters agreed with Romney and Paul Ryan over the deficit. But an American election is not a game of economic Mastermind. Obama was a better candidate with a smarter campaign: he deserved his victory.

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But the President will know how hollow that victory might be. The first mission of Obama’s second term will be to try to come to a deal with the Republicans over the ‘fiscal cliff’ — the spending cuts and tax rises that are due to be implemented on 1 January unless the President manages to broker a deal. He has failed to win the clear popular vote he would need to go to Congress and claim a personal mandate. The Republicans kept control of the House of Representatives, and with it their bargaining power over tax and spending. Their budget negotiations will be led by Paul Ryan, Romney’s running mate.

Obama came to office with a long list of proposed reforms. He has been re-elected with almost none — and perhaps this is just as well. John Boehner, Speaker of the House, said the elections gave Congress renewed authority to confront the White House over state spending and that the ‘American people have also made clear that there is no mandate for raising tax rates’. After fighting the most vicious negative presidential campaign in recent history the Democrats and Republicans in Congress are unlikely now to hold hands in a spirit of bipartisanship. Obama returns to a Washington even more bitterly divided at the start of his second term as it was at the end of his first.

Obama was, naturally, on top rhetorical form after his victory. He told crowds of his supporters how ‘hope’ remains ‘that stubborn thing inside of us that insists, despite all the evidence to the contrary, that something better awaits us’. This could have been a useful theme to his campaign. The evidence of the last four years left Americans with precious little reason to believe that the next four would be any better. The presence of ‘hope’ is a fine line for a speech, but distinctly worrying as economic policy. Obama may hope that America can keep borrowing from China in perpetuity, but hope alone will not sustain that status quo.

There is something admirable about Americans being furious with economic growth of 2 per cent, when Brits pop champagne corks at half that figure. Even now, America remains a country with taxes and regulations low enough for enterprise to prosper. The exploitation of shale gas has revolutionised America’s energy market, as Jim Pinkerton says on page 38. There is talk of a ‘homecoming’ as American companies move back to capitalise on the new cheap energy. Dow Chemical is shutting operations in Britain and Japan but investing heavily in a propylene venture in Texas. While Britain’s regulators see shale as a threat to the status quo, America is embracing a revolution which may yet lead to a million manufacturing jobs.

Boehner is certainly correct in saying that the Republicans in the House have no less a democratic mandate than the Democratic White House. When faced with similar standoff, Bill Clinton moved to the centre. This era gave us radical welfare reform, the type which Britain is still trying to emulate, and what can in retrospect be seen as a golden era of fiscal sanity. Obama is an expert at mopping up applause, but will know that to govern well, he will have to make concessions with the conservatives.

There is much to do in America and, emboldened by his first term, Obama may now feel freed up for his second. When first elected, he told the American electorate: ‘We are the ones we have been waiting for.’ Four years later those same supporters have signalled that they are happy to wait around a little longer. But if this President wishes to leave any tangible legacy — and fulfil the hopes of his allies — he must not merely talk about America’s potential; he must work out how he intends to unleash it.

This article first appeared in the print edition of The Spectator magazine, dated