He came, he saw, and as they say in showbiz — for that was what Barack Obama’s European trip was all about — he knocked them dead. Having given the Germans an opportunity to adore him; traded views with Tony Blair on the plight of less charismatic politicians in the Middle East and, dare it be said, in Britain; heard Gordon Brown extol the virtues of the British healthcare system; and compared views on the role of individual responsibility with David Cameron, Obama returns to the United States to continue to persuade voters that he has the answers to their economic malaise.

He starts with a real advantage. Although unemployment remains low and the economy continues to grow, voters are worried. A bank has failed, the financial news channels pump out dark tales of foreclosures and write-offs, petrol prices are crushingly high, and food prices are soaring. Most Americans say the economy is the most important issue in this election, and three out of four think we are in recession.

Add that the Republicans are no longer in a position to chide Democrats for being wild-eyed spenders, for subverting the free-market system and for favouring heavy-handed regulation. President George W Bush has presided over the most expensive expansion of the welfare state since the days of Lyndon Johnson’s Great Society programmes, acquiesced in elaborate plans to bail out troubled financial institutions rather than leave their fates to the market, and along with his Treasury secretary, Hank Paulson, has rolled out myriad regulations covering short-selling, capital requirements and conduct of mortgage brokers, to mention only a few. Bush has also approved a stimulus package designed to shore up consumer spending, proving that Richard Nixon was on to something when he said “We’re all Keynesians now”.

But we’re not all protectionists now. And Obama definitely is, which probably upset Gordon Brown and Angela Merkel as much as it delighted Nicolas Sarkozy. The Democratic candidate contends that he is not against trade-opening agreements per se, but he has yet to find one that suits him. The North American Free Trade Agreement (Nafta) is too one-sided, and doesn’t include sufficient protection of the environment and labour standards. Unless Mexico and Canada agree to amend it, Obama has promised (sort of) to terminate the deal unilaterally. (Unless you believe his economic adviser, who slipped into the Canadian consul-general’s office in Chicago to say his candidate doesn’t really mean it.) The proposed agreement with South Korea is a bad deal because it doesn’t remove all barriers to sales of American cars. And the deal with Colombia, which opens substantial markets to American goods, can’t win Obama’s support because the administration there is not doing enough to protect trade-union leaders from terrorists.

Unfortunately, this is a particularly bad time for America to start a trade war. Exports are booming. In states such as Ohio one out of every four manufacturing jobs is devoted to exports, and one out of every three acres of farm land is produc- ing food to be sold abroad. All in all, exports are adding about one percentage point to GDP growth, more or less offsetting the drag created by the decline in home construction.

That fact does not impress the trade-union leaders on whom Obama is counting to turn out the doorstep canvassers, man the telephone calling banks, and help fund what is shaping up to be the most expensive campaign ever waged. In addition to toeing their protectionist line, Obama has promised legislation that would eliminate workers’ right to a secret ballot in union- recognition elections. Small businesses are alarmed at the possibility that their employees will be coerced into voting for union recognition by organisers no more famous for taking “no” for an answer than is the EU when confronted with a rejection of its latest treaty.

Perhaps even more important are Obama’s plans for income redistribution. He feels the “economy . . . is out of balance . . . rewards a very few . . . while ordinary, hardworking Americans continue to get squeezed”. To correct the imbalance he would raise the minimum wage from $6.55 per hour to $9.50 over two years, and reform the tax structure by raising taxes on all families earning more than $250,000 a year in order to fund an annual tax cut of $1,000 for middle-income families, and exemption from taxes for seniors earning less than $50,000 per year.

He also plans to end the relationship between payments into the social security fund and withdrawals on retirement by raising the contributions of higher earners, with no compensating benefit. Combined, these reforms will raise the effective marginal tax rate to about 60%.

There’s more. Capital-gains taxes will go from the current 15% rate to 25%; dividend taxes will rise; and a 45% inheritance tax on estates worth more than $3.5m will be reinstated. In addition to tax relief for the middle class, the money will go to fund (almost) universal health insurance ($65 billion annually), infrastructure ($60 billion), relief of homeowners struggling to meet mortgage payments ($20 billion), alternative energy ($15 billion), and more new programmes than can be listed here.

It is still a long road to the White House, especially if John McCain can figure out how to overcome the media bias that has hundreds of top reporters on the road with Obama, while a virtual news blackout is imposed on him by Obama-loving editors.

It is also possible that Obama’s many supporters in the business community are being quietly told that their candidate really doesn’t mean to do them harm. He is hinting that tax changes will be contingent on the economic conditions when he is sworn in, and has characterised his promise to abrogate Nafta as “overheated rhetoric”.

My guess is that he has given so many hostages to fortune that the trade unions and the dominant Left of his party will not let him off the hook. A President Obama would have no choice but to raise taxes and trade barriers.

Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute

stelzer@aol.com

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