Obama Wins! Now He Has to Get it Right.

After an amazing landslide victory, Barack Obama is heading to the White House. He faces one of the most challenging presidencies in history, not least because of his role in supporting the faltering economy. The Financial Times puts it well in an article entitled Dear US President-Elect:

Here are the two central economic roles you must play. First, to make sure the half dozen or so Treasury-led initiatives to revive the financial system are well managed. Unpopular though banks now are, they remain central to the economy.

Making credit available again (even if borrowing remains weak) is a priority. What you must resist, however, is extending the state lifeline to every two-bit sector that comes begging. Your second crucial role is to guarantee that any further fiscal packages are focused on boosting future productivity rather than building bridges to nowhere.

Unfortunately, Mr President, you can only influence house prices, corporate earnings, interest rates and jobs at the margin (unless your administration loses its head). But as these issues are politically charged, you will surely be pressed to do something. Resist. If you have to “act”, make your initiatives popular but harmless. Get the crucial things right and the cycle will ride to your rescue in the end.

The Treasury initiatives are already being managed by current and ex-Wall Street execs
, meaning that managing them well–in the best interest of the macroeconomy–will definitely be a challenge. Boosting productivity has a lot to do with boosting exports, made easier by a weak US dollar. Lower tariffs and strong free trade agreements help; Obama being a union man and for farm subsidies means that getting this accomplished will be tricky at best.

He has to be nimble enough to maneuver the economy away from every pitfall it has fallen into during the past year. The campaign garnered votes by sticking to its message. In fixing the economy, the opposite tack may be best: Don’t promise much and work on many fronts at once in a moderate way.

He’s in a powerful position, but not an enviable one.

  • Drea, I would not call his victory a landslide. True, he beat McCain with many electoral votes, but he only had a 8m margin win in the popular vote. I would not call that a landslide victory.

  • Drea

    Devin, good point. I feel safe using the “landslide” terminology because it could refer to an electoral college victory or the popular vote. I agree that the pop. vote was much closer…

  • Free Trade & Globalism caused ever-growing trade deficits and US Dollars to pile up offshore, then foreign investors got taken to the cleaners by Wall Street bankers and their unregulated, flim flam derivative schemes. Combined with Enron/Arthur Anderson, the Bush Administration, and the Oil War in Iraq, the rest of the world has learned the hard way not to trust an American banker, businessman, or politician. So, if we want to lure some of those off-shore dollars back as real investments instead of more debt fuel, we are either going to have to give foreign investors a seat at the boardroom table where they can keep an eye on our devious business practices OR create some new financial institutions that feature real transparency, sound social & economic values, and honest dealings. What we need most from President-elect Obama is to either make clear the changes necessary to get globalism to work for ALL the people OR get us all to rethink the relative merits of Free Trade vs. Balanced Trade as a guiding principle. Because another boatload of cash is leaving the dock heading East, and, right now, it probably won’t come back except as more loans to the Federal Government or to buy up some US industrial assets and ship them somewhere else. How long are we supposed to subscribe to an economic theory that is draining real wealth from our country and replacing it with monthly doses of additional indebtedness? When are we going to start to invest in our own country’s long-term future and stop encouraging productive companies to off-shore themselves and leave society to fend for itself?

  • Drea


    Great points. What would those new financial institutions look like–public or private? What are the best ways to invest in our country’s long-term future? How can we stay globally competitive while keeping jobs at home? I’d love to hear your insight.