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Analysis: Obama's leadership image on the line in debt saga

US President Obama pauses while speaking at the annual conference of the National Council of La Raza in Washington
US President Obama pauses while speaking at the annual conference of the National Council of La Raza in Washington

By Caren Bohan

WASHINGTON (Reuters) - President Barack Obama's credibility as a leader hangs in the balance along with America's gold-plated credit rating as he strives to break a debt impasse with Republicans and avoid a ruinous default.

Even if a deal to raise the debt limit emerges ahead of an August 2 deadline -- just six days away -- Obama faces a risk of being perceived as weak if he appears too willing to make concessions.

The political fallout for Obama could be far greater if there is no agreement. A default and government-debt downgrade could send the U.S. economy into another recession, potentially dooming Obama's prospects for re-election in 2012.

That makes the crisis especially difficult for Obama to navigate and gives Republican lawmakers a fair amount of leverage as they push for steep spending cuts in exchange for raising the legal limit on the country's borrowing.

"When you're running for re-election, you want to have a strong leadership image," said Stephen Wayne, a professor of government at Georgetown University. "The longer there is no resolution, the weaker the president looks."

"He's got to do something to get an agreement or to state his position so clearly that he can blame the opposition party for not adhering to it," Wayne added.

Obama could reap political gains if Republicans are perceived as overplaying their hand.

Polls so far show a mixed impact of the crisis on Obama.

A Reuters/Ipsos poll on Tuesday showed a clear majority of Americans -- 56 percent -- back reducing the deficit through both spending cuts and tax increases, in line with Obama's approach.

The poll found that 31 percent of respondents held Republican lawmakers responsible for the impasse, 21 percent blamed Obama and 9 percent blamed Democratic lawmakers.

The standoff seems to have contributed to a steady erosion in Obama's approval ratings in U.S. opinion polls, from above 50 percent after he ordered the raid that killed al Qaeda leader Osama bin Laden in May to current levels near 45 percent. Some recent polls have shown Obama lagging a few points behind an unspecified Republican challenger.

'ADULT IN THE ROOM'

Throughout the saga, Obama has sought to portray himself as the "adult in the room" by emphasizing his willingness to compromise as he and his aides have issued grave warnings about the need to strike a deal to head off an economic catastrophe.

He hopes to draw a contrast with Republican lawmakers, who have been accused by Democrats of intransigence.

A speech Obama delivered in April laying out broad principles for deficit reduction marked his entry into the debt limit negotiations that have now gone down to the wire.

Republicans have faulted him for declining to lay out a detailed plan.

Obama has alternated between keeping a low public profile on the debt issue, as he did when Vice President Joe Biden led a series of meetings with lawmakers in May and June, to his more recent use of the presidential microphone with a series of news conferences and a televised address to Americans on Monday.

White House aides believe the decision last Friday by House of Representatives Speaker John Boehner, the top Republican in Congress, to walk out of talks with Obama on a far-reaching "grand bargain" on deficit reduction underscored the image of the president as the more reasonable player in the dispute.

But Obama's inability to get a telephone call returned from Boehner last week and his own description of himself as having been "left at the altar" by the speaker might undercut his leadership image if the debt talks fall apart and damage the economy.

Boehner's abandonment of the grand bargain was a huge blow to Obama, whose advisers had hoped a broad deficit deal would have given him a big boost with independent voters crucial to his re-election chances by showing him to be a leader willing to cut spending and get the U.S. fiscal house in order.

With talks focusing over the past several days on a debt limit increase combined with a more modest deficit reduction package, the action has moved to Capitol Hill with the Democratic-led Senate and Republican-led House pushing rival proposals.

The president's address on Monday was aimed at countering the impression that he has been sidelined. White House aides say he has been heavily engaged behind the scenes with lawmakers, working the phones.

"It may be that he feels that if these things need to be resolved on Capitol Hill, that it's best to give them the opportunity to work on them," said Ross Baker, a professor of political science at Rutgers University in New Jersey.

"There's not a whole lot of time. That's the problem," Baker added.

(Editing by Will Dunham)

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