Rupert Cornwell: Popular President decides he needs to act fast and think big

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Barack Obama's message is clear: Americans, fasten your seatbelts. The next 12 months are likely to see a whirlwind of legislation and governmental activism, as a new administration seeks to rescue US capitalism with the biggest makeover of that capitalism since Franklin Roosevelt's New Deal three-quarters of a century ago.

Mr Obama's debut address to Congress – a State of the Union speech in all but title – picked up where his inaugural speech left off. Back then, on a bitter January morning, he urged Americans to "put away childish things," and face up to the consequences of a decade of putting off decisions and living beyond their collective means. This time, the warning was, if anything, starker: "The day of reckoning has arrived," he proclaimed. The difference was that the President set out the broad outlines of the hugely ambitious programme he believes will put things right, and "take charge of our future."

It embraces not just the unprecedented $780bn (£550bn) fiscal stimulus, and the yet-to-be-finalised restoration of US banks but an overhaul of the tax code and social security, a revamp of the country's vastly expensive and inefficient health care system, cuts in military spending, and steps to replace America's dependence on imported oil with clean, renewable and home-produced energy.

Just like the inauguration speech, the address to Congress was unflinchingly realistic: whatever the government did, he made clear, the recession would get worse before it got better. Indeed, since he took office, the Dow Jones index has fallen by 10 per cent.

Unlike the inaugural however, Mr Obama threw in a dollop of the oratory that gave wings to his election campaign – a step that Bill Clinton, the last Democrat in the White House, among others had urged. This time, he offered hope as well as pain. Yet again he projected a calm certainty that this crisis, like other great challenges in America's history, would be overcome.

Nowhere was that balancing act, between populism and realism, more delicate than in dealing with the banks and financial institutions, public culprits for the financial crisis. Mr Obama expressed the ordinary American's fury at feckless and greedy Wall Street – but only to sugar the hard truth that, like it or not, feckless and greedy Wall Street needs an even bigger bailout. "There will be no real recovery," he warned, "unless we clean up the credit crisis that has severely weakened our financial system."

The administration still hopes to avoid wholesale bank nationalisations. But, one way or another, the Obama road to economic salvation lies through an expansion, temporary or otherwise, of government not seen here since the 1930s. And all this, while somehow halving the stratospheric budget deficit ($1.5trn perhaps this year) by the end of his first term in 2012.

A first idea of how this feat is to be achieved comes today with publication of the fiscal 2010 budget. Usually, this document is a fantasy, not worth the hundreds of pages it is printed on. This one however is touted by Mr Obama as "a blueprint for our future." The President, in other words, believes this moment of national emergency also offers a perfect opportunity to ram through changes that otherwise might be impossible – in tax and energy policy, health care and a host of other fields.

To save money, some big-ticket military programmes are likely to be scaled back or even cancelled, while most US combat troops will be out of Iraq in 18 months. George Bush's tax cuts for the wealthy will be allowed to expire in 2010, and unjustified agricultural subsidies will be scrapped.

Can Mr Obama pull it off? All that can be said with certainty is, the sooner he acts, the better. Americans are clearly in the mood to give him an extended honeymoon, while the post-Bush Republicans are in disarray. Polls moreover show their rejection of bipartisan overtures on the stimulus went down very badly with voters.

But Washington's vast forces of inertia must not be underestimated. Mighty armies of lobbyists are paid to defend the status quo – nowhere more so than in health care, where government intervention is derided as "socialism" and not only on the right.

Mr Obama wants comprehensive reform that provides coverage for the 45 million Americans who are uninsured, and cuts costs at the same time. The obvious way of achieving that is a single-payer system. But even more than nationalisation of the banks, that truth is one that dare not speak its name. Even his plan to set up a federally-run computer base for individual health records is being criticised.