The man who may change Uncle Sam…
The belief, tradition and a long spell in the United States of America of white man’s rule has been broken. Demo-crazy (read President George W. Bush’s hegemony-like neo-dictatorship) has been replaced by Democracy! The Americans have overwhelmingly voted for a real change. A change that is unique.
Mr. Obama is highly educated, he is not a religious doctrinaire, he does not own industries, he has lived out of America and has the overseas exposure. He does not use rhetoric to camouflage tall promises and in his post-win speech, he simply vowed to be honest to his people. Among the ensuing legitimate euphoria, Americans must not forget the formidable domestic and international challenges that President Obama will be facing up 2009 onwards.
The United States of America in 2008 won over in good faith by Mr. Obama is in a terrible mess. It is in a shambles economically and internationally, its policies have brought ruin and misery to millions. America today is perceived as brash with scant regard for international goodwill. As a country that has for some time ignored international norms and pleadings, the United States of America will need to be redirected to the ‘rightful’ path – where the country’s priority must be humility not arrogance; more troops out of the barracks than inside them; peace and reconstruction not war; better and cheaper foodgrains and not mindless production of biofuels…
The world’s wealthiest democracy has proved that its proletariat are capable of voting on non-colour basis. What is now to be seen in the coming few months is the direction President Obama will take his country in terms of bringing it out of an acute financial crisis and also in repairing relations with some countries – a damage his predecessor so arrogantly caused.
Source: Challenges In Obama Land By Ken Stier/CNBC.com
Even after a decisive election victory, US President Barack Obama’s platform policies will almost certainly be scaled back based upon the current economic maelstrom, particularly if it carries over into next year with significance, as expected.
So what will the new, leaner Obama policies look like? Many in the Obama brain trust already are studying President Franklin D. Roosevelt’s first term, and there is talk of a new “New Deal.” Most analysts expect Obama to hew to liberal mainstream economic measures, including large government deficit spending, albeit with a strong emphasis on reducing wealth and health inequalities, which have widened markedly in recent years. Here’s what to expect:
The rescue and resuscitation of the financial system will remain the primary focus of Obama’s policies.He is already gearing up to have an economic team in place well before the inauguration. If this downturn lasts a long time and is much deeper than what we are saying, then there is no question that it will change the agenda dramatically much more aggressive than anybody is talking about, said Nariman Behravesh, chief economist at Global Insight. That changed agenda could include more aggressive action on foreclosures, and stimulus packages that could raise to $500 billion. Martin Baily, former chairman of Council of Economic Advisers, and now at Brookings Institution, says $300 billion will be needed to ameliorate a recession.
Economic Rescue Plans
It remains unclear how Obama would try to alter current economic rescue plans, including the increasingly controversial Troubled Asset Rescue Program (TARP), but most expect he will support recent moves to more directly support homeowners with troubled mortgages. Greater Regulation Expect the pendulum to swing back to more regulations, although a significant expansion of the government may not be stymied by fiscal constraints.
The most immediate agenda item will be a far-reaching regulatory overhaul of the financial sector, aimed at expunging the incentives encouraging excessive risk. Expect a broadened focus from individual institutions to ensuring systematic stability. A roadmap for this will evolve from an expected blue-ribbon commission, possibly headed by former Federal Reserve Chairman Paul Volcker, an Obama advisor. The question is which sectors within the financial sector will bear the brunt of the regulatory reforms, says Robert Johnson, a former managing director or Soros Management Fund. When the vultures are circling looking for a scapegoat, the hedge funds might look at little vulnerable, he adds, even though they have been major early Obama supporters.
The New “New Deal” Expect a stronger government hand in planning or at least channeling investment as part of the New “New Deal.” A premium will be investments with the most transformational impact, according to Lawrence Summers. Besides renewable energy technologies, and the infrastructure to support them, this is likely to include broader applications of biotechnologies and greater broadband connectivity. The aim is to unlock productivity gains that in previous decades were triggered by the interstate highway, widespread air travel, electronics and later, information technology.
With an emphasis on spurring alternative energy to reduce dependency on overseas oil, Obama has called for spending $150 billion over 10 years, hoping to create 4 million “green” jobs. Funding was meant to come from an auctioned cap-and-trade carbon emissions program that has probably been pushed down the road. Mr. Obama has a real commitment to investing in areas that have been ignored or under-invested in by government for decades, including energy that $150 billion plan is a major public investment plan, and it is transformational, says CNBC contributor Jared Bernstein of the liberal Economic Policy Institute.
Obama’s room for manoeuvre is narrowing as new initiatives to deal with the mortgage crisis get underway. Meanwhile, there is a growing consensus of the need for urgent action to stem accelerating foreclosures and repossessions.
(The article is a reproduction form the author’s column that appeared on www.fnbworld.com)