ROBB AUSTIN'S TURN
For Obama the Economy Takes Center Stage
November 22, 2008
President-elect Barrack Obama is making it clear that he will govern from the center and is doing his best to work with both Republicans and Democrats to get the country moving forward.
He put out an olive branch to his defeated rival Senator John McCain; has had kind words for the transition support he is receiving from President Bush, and has forgiven Connecticut Senator Joe Lieberman for some of his remarks against him on the campaign trail.
He has made solid choices for his cabinet - a mixture of old-line Washingtonians and some newcomers. Some of the names we’ve heard so far include New Mexico Governor Bill Richardson at the Commerce Department; Hillary Clinton at the State Department; and former Majority Leader Tom Daschle at the Department of Health and Human Services. We can also expect him to name at least one Republican - maybe two - to his cabinet.
One of the new names to surface is Obama’s selection at the Department of the Treasury where his choice is Timothy Geithner - former President of the Federal Reserve Bank of New York. It’s important to note that Wall Street likes Geithner, and that’s very important if Obama is going to hit the ground running and settle nerves in the financial markets.
The markets are also going to be watching what happens regarding the automobile manufacturing industry and the $25 billion bailout they are seeking. Many do not believe this would be money well spent - and the auto executives themselves did not do themselves any favors when they arrived in Washington from Detroit on private corporate jets.
There’s no question the automobile industry needs to restructure itself but there are big concerns about handing out money from the American people without the kinds of oversight that will be required to ensure that the loans will be well-spent - and more importantly - paid back to the taxpayers when the industry does rebound.
President Bush has not instilled confidence during this crisis, and there seems to be some confusion on what’s happening with the original $700 bailout approved by Congress relating to the housing meltdown. But lack of confidence is what's troubling the economy the most.
The President has gone along with Congress to extend unemployment benefits for a million laid-off Americans who would soon lose their benefits. The seven additional weeks of benefits will be in addition to the 13-week extension approved by Congress in July.
President-elect Obama is pledging to zero in on the economic crisis as soon as he takes office - and while there’s no question the country will pull itself out of this economic mess - it may not happen as quickly as people would like.
Americans are rightly scared about the state of the markets but if history is a judge, brighter days may not be too far down the road. A bear market is usually defined as a 20% decline with widespread pessimism over a two-month period . A typical bear market lasts 12 months.
The current bear market is down over 40% over the past 13 months but since the markets usually react to the future - not the past - there is reason to believe things could turn around in the markets over the next six months. That doesn’t help the suffering right now - but still - stock prices are so low that those with the stomach to buy stocks might see great rewards in the next bull market - which will come.
The housing market is another story. There is a tremendous backlog of houses on the market, and the credit crunch means only those with excellent credit and a strong cash reserve will be able to purchase a home in the foreseeable future. The housing recovery will not begin until much of the current inventory gets sold ,and that will not happen for quite some time.
The economic recovery will gain momentum a lot sooner if the new administration and Congress can put partisanship aside and act in the best interest of the country. Ronald Reagan once had a plaque on his desk that read, "There’s no limit to what can be accomplished if no one cares who gets the credit."
Maybe Obama will take Reagan’s cue.