Barack Obama looks at a portrait of James Madison

Two hopeful signs in the last week actually illustrate the political obstacles to sorting out America’s moribund economy.

President Obama negotiated a deal with Republican leaders in Congress to extend Bush-era tax cuts, while a bipartisan commission on deficits set up by the President agreed to support some good ideas.

Tax cuts and deficit reduction would certainly help the economy in their own right, but their real significance would be that they would show that the US government has an agreed and stable policy in which investors and entrepreneurs could have confidence for the next few years.

Alas, that seems unlikely in practice. The price of extending the tax cuts is extending unemployment benefits – a political necessity but one which goes against the other objective, of cutting the deficit. The deficit reduction plan itself looks like a dead letter.

The problem is the way the US Congress works. This is a simplification, but in most other countries, the legislatures simply vote “Yes” or “No” on spending requests put forward by their governments; in the USA, individual legislators, Senators and Congressmen, can put their own spending proposals to the vote. They have every incentive to do so: spending someone else’s money, especially in their own home State or District, buys votes. They also have every incentive to help each other: Senator X will support Senator Y’s spending proposal because he needs Y’s support for his own.

No one has any incentive to be financially responsible. In other developed nations, that responsibility rests clearly with the government, the executive, and the legislature serves only as a check, but in America the legislature takes the initiative – and takes the country in several different directions at once.

This problem is rooted in America’s Constitution. When an idealistic bunch of lawyers, James Madison and Co, drafted the Constitution in the 1780s, the young Republic was a decentralised, mainly agrarian, confederation, with no idea what the future might hold. The main concern was to appear democratic and avoid strong centralised power or anything that resembled monarchy. The world has changed dramatically since then – and strong centralised power has developed by default to cope with it – but the Constitution has not changed to reflect that.

Nor is it likely to change: Americans revere their Constitution – but every businessman knows that you cannot run a major 21^st Century organisation with an 18^th Century management structure.

Businesses around the world – not just in America – are concerned about the continuing listlessness of the US economy.

This is one area where “Change” really is necessary. Yet Tuesday’s elections exposed how vacuous that word has become. It was Barack Obama’s slogan in 2008 – but this year it was the Republicans who were using it. Of course, what Mr Obama meant by “Change” and what the Republicans mean by the same word are two very different things, but what really matters to those of us who have to deal with the practical consequences is that major change of any sort is unlikely for the next two years.

Here are the hard facts. If the Republicans, who now control the House of Representatives, try to implement their idea of “Change”, it will be squashed by President Obama, who has power of veto, and by his Democratic allies who still control the Senate. If, on the other hand, Mr Obama still wants to push his own idea of “Change”, it is most unlikely to get through the Republican House.

It would be nice to think that this might encourage Mr Obama and the Republicans to work together for the common good. President Reagan was often able to charm Democratic Congressmen to vote his way in the 1980s, and President Clinton worked well with the Republicans on deficit reduction and welfare reform in the 1990s. However, there is little inter-party goodwill left in Washington these days. Whatever the rights and wrongs of the way Mr Obama rammed healthcare reform through Congress, it left him with no friends on the Republican side.

The irony is that all this might help Mr Obama. President Clinton faced a similar situation in 1994: after a disastrous start to his Administration, he lost control of Congress to the Republicans – and thereby saved his Presidency. A hostile Congress forced him to the political centre – where his Administration became more successful – while simultaneously giving him someone to blame. His party’s defeat in 1994 led directly to his own re-election in 1996.

Tuesday’s result has therefore made Mr Obama’s re-election more likely in 2012. However, unless he comes to a second term with a new economic agenda, real “Change” will be delayed for another four years. In the meantime, America’s enterprise culture will probably deliver a degree of recovery – in spite of the government rather than because of it: at least the squabbling among the politicians will mean they will have less chance to make things worse. However, all that time America will be losing her competitiveness, and the shift of global economic power across the Pacific will continue.