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Given the reality of a credit crunch that shows few signs of easing despite the billions of dollars of government money thrown its way, an alternative to offering the new president-elect congratulations might be: “Welcome to hard times.”

The honeymoon period that most new presidents enjoy has probably been voided this time around. From Day One, as the former Democratic presidential candidate, Sen. Hillary Rodham Clinton used to say, President Barack Obama will face a financial crisis that only threatens to become more severe at the start of 2009. And it’s one for which there are no simple fixes — only controversial and painful remedies that may or may not work.

Illustration by: Matt Mahurin

“It’s really analogous to choosing a new skipper for the Titanic after it already hit the iceberg,” said Guy Cecala, publisher of Inside Mortgage Finance, which covers the subprime lending industry. “It’s not the kind of situation where the president can sit down and and concentrate on a plan. He’ll be in damage-control mode every single day.”

The first big problem: The subprime mortgage mess that has led to so many foreclosures already is only about three-quarters of the way through, Cecala said. Foreclosures overall set a new record — with a 71 percent jump in the third quarter of this year, according to RealtyTrac. But more are coming, and soon, as subprime loans with adjustable rates reset this month and in 2009, hiking monthly payments as much as 40 percent.

The Center for Responsible Lending predicts some 2.2 million subprime foreclosures in late 2008 and through the end of 2009.

As bad as that sounds, subprime loans aren’t the only — or even the worst — problem.

Alt-A loans, or liar’s loans, that required no income or employment verification, reach their peak default year in 2009. And Alt-A loans comprise a $1-trillion market, compared to the $885-billion total for subprime loans, according to Inside Mortgage Finance.

The Alt-A loans are already in trouble, with Bloomberg data showing 16 percent of loans made since January 2006 some 60 days late. RealtyTrac is forecasting further defaults in the next few years.

Most people don’t understand that the Alt-A market is larger than the subprime market, and don’t realize how much of the mortgage mess still remains, said Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College in New York. “A lot of people really have no idea of the size of this,” he said. “If you want to paint a depressing picture, it’s quite possible.”

In the meantime, payment option adjustable-rate mortgages, that allow borrowers to choose the amount of their monthly payments, begin their three- and five-year resets in 2009, and continue for the next three years — or for the duration of new president’s entire first term.

These loans allow borrowers to pay only the interest on their loans for the first few years. But then their payments jump dramatically, and some borrowers may be facing increases as high as 63 percent, Fitch Ratings concluded recently. That kind of hike could add an extra $1,053 per month to a borrower’s payment.

“The POARMS are definitely the next disaster waiting to happen,” said Kathleen Keest, senior policy counsel at the Center for Responsible Lending.

It’s not likely that borrowers will sell or refinance their way out of any of this, given that the steep decline in home prices is only likely to continue. Nearly 1 in 6 homeowners now owe more on their mortgages than their homes are worth, according to Moody’s Economy.com.

“With more people upside down, if you lose your job, or someone gets sick or hurt, it’s even easier to make the decision just to walk away,” said Lawrence White, an economics professor at New York University’s Stern School of Business.

Add to that the deteriorating economy, which is likely to ensnare more and more prime borrowers, who could lose their homes to foreclosures because of rising unemployment, corporate cutbacks and layoffs.

“You don’t have to overanalyze the situation,” noted Cecala, of Inside Mortgage Finance. “All these problems are just going to get worse.”

Given all this, the new president may not be able to wait until he takes office to take action, said Desmond Lachman, a financial markets expert with the American Enterprise Institute. The credit crisis is so severe that Obama should begin stepping in immediately, possibly by using his position as a senator to propose a stimulus package, Lachman said.

Martin Feldstein, a Harvard University economics professor and adviser to the campaign of Rep. Sen. John McCain, first pushed that idea in a Washington Post op-ed last week. His point was that with both candidates also serving as senators, both had options to act early, if elected. From Feldstein:

Further legislation to deal with the economic crisis should not wait until the new president takes office. Fortunately, the president-elect will be a senator and can propose legislation without waiting to be sworn in as president. Immediately after Nov. 4, the winner could, and should, take the lead in the legislative process.

The problems with mortgages are just one piece of the bigger credit crisis, which has shown little sign of improvement despite the $700-billion government bailout, Lachman said. The auto industry is imploding, consumer confidence is at a record low, and home prices keep falling. Banks stubbornly refuse to lend. If the new president-elect waits until his term in office begins to start moving on the crisis, it could be too late, he said.

“The economy is literally falling off a cliff,” he said. “We’re just in this downward spiral. In my view, you can’t wait until March or something. There’s a lot riding on this.”

The new president will have to make decisions that may be bold, unorthodox and with unfortunate long-term consequences, Lachman said. But the dire economic situation will give him little choice.

And it’s not just the start of his term that will be consumed by the financial crisis, Lachman said. Obama may find his entire presidency defined by difficult economic times, just as Franklin Delano Roosevelt did, some 75 years earlier. Friday’s news conference on the economy – Obama’s first as president-elect — marks only the start of a long battle ahead.

Democratic House leaders, with Nancy Pelosi. (flickr)

For the past two years, the House of Representatives has been busy as bees getting not much done. Under Democratic leaders who took the helm in 2007, the party has had great success moving the policy priorities that propelled it into power in 2006 — only to see most die an early death by Senate filibuster or White House veto.

Measures to shift the nation’s energy policy toward renewable fuels, rehabilitate crumbling infrastructure and expand health coverage to millions of uninsured kids are just a few of the proposals to hit a wall of GOP opposition after sailing through the lower chamber.

Illustration by: Matt Mahurin

With Barack Obama assuming the presidency in January, congressional leaders should be eager to return to their wish list. And it seems likely they will. In an interview last week with CNN, Obama listed the priorities of his (then-theoretical) administration, which amounted to an agenda that could have been written by House Speaker Nancy Pelosi (D-Calif.). Energy independence. Health-care reform. Middle-class tax breaks. Education investment. Obama’s list melded with Democratic priorities of the past few years.

Speaking to reporters yesterday, Pelosi deferred to Obama’s yet-unspecified strategy but seemed to anticipate a well-coordinated effort. “We’ll be working with the new president on his legislative agenda,” she said, “but our priorities have tracked the Obama campaign priorities for a very long time.”

As a result, the days of the Democratic Congress’s ineffectiveness may be over. In the wake of Tuesday’s remarkable win, Obama not only controls the White House but has influence over a Democratic Congress that owes much of its electoral success to his presence on the ticket. Party leaders have been careful not to call his victory a mandate — at least not publicly. But the enormous popularity of Obama — combined with wider Democratic margins in Congress and public anxiety over the sputtering economy — gives the party a rare opportunity to get something done.

At the top of Obama’s domestic wish list is energy independence. On the campaign trail, the Illinois senator vowed a 10-year, $150-billion investment in renewable technologies as a way to wean the country from its foreign-oil addiction and create jobs in the fast-growing clean-energy sector.

The goal is shared by Democratic leaders. Last month, Congress allotted $18 billion to extend tax credits for investments in renewable fuels. That extension, though, is temporary — eight years for solar technologies and one year for wind.

Environmentalists view Obama’s green-investment plan as a vital part of any shift toward green technologies. “The tax credits alone are not enough,” said Nick Berning, spokesman for Friends of the Earth.

To pay the tab, Obama’s plan calls for a cap-and-trade system on carbon emissions — another goal of Democratic congressional leaders. The president-elect’s proposal would require large-scale polluters to pay for every ton of carbon emitted. The effort would reduce emission levels 80 percent by 2050, according to the Obama campaign.

Obama is also pushing for an increase in fuel-efficiency standards. Last December, Congress passed legislation setting a 35-mile-a-gallon floor by 2020, but many Democrats have called for stricter measures. A proposal pushed by Democrats almost two decades ago would have bumped that floor to 40 mpg.

Daniel Becker, director of the Safe Climate Campaign, pointed out that because the new law doesn’t include a ceiling on fuel standards, Obama could make the change without going through Congress. “They can go well beyond 35 miles a gallon,” Becker said.

Obama also told CNN that health reform will be one of his top priorities. Many experts predict that a logical place for Democrats to begin next year would be children’s health care. A year ago, Democrats passed a $35 billion expansion of the State Children’s Health Insurance Program, or SCHIP, to cover millions of kids currently without insurance.

The proposal attracted enough Republican support to elude a Senate filibuster, but not enough to override two presidential vetoes. With a Democrat in the White House, the bill would easily become law — a scenario some policy experts predict for early next year.

“They’ll do it very quickly,” said Bruce Lesley, president of First Focus, a child-welfare group. “They’ll be looking to get some things done, get some quick wins. And of course they’ll have a president who won’t veto it.”

Lesley also pointed to the likelihood that an Obama administration would repeal a controversial Bush administration regulation — issued quietly in the summer of 2007 — that sets strict (some say impossible) limits on states wanting to expand their SCHIP programs.

Yet many key Democrats talk about health-care reform that far transcends the SCHIP slice. This leaves some experts speculating that party leaders might try to use the post-election momentum to pass a far larger package.

Sen. Edward M. Kennedy (Mass.) is busy crafting one such plan. The nine-term Democrat hopes to tackle the proposal early next year, putting pressure on Obama to join the effort. Michael Myers, staff director of the Senate health committee, which Kennedy heads, told reporters Thursday that the details of that plan have yet to be worked out. But he stressed that the issue will certainly come up next year.

“With the Obama victory,” Myers said, “the question is no longer whether we will pursue comprehensive health reform, but when — and in what form.”

Much of what the 2009 Congress will confront hinges on what the 2008 Congress gets done this month. Democrats are pushing hard for yet another economic stimulus measure, to be taken up when Congress returns to Washington on Nov. 17 for a short, post-election “rump session.”

Party leaders hope to include billions of dollars in new infrastructure spending, unemployment benefits and low-income health-care funding. The Bush administration opposes much of the plan, however, leaving the real possibility that passage will be delayed until early next year.

Another wildcard: How the nation’s lenders respond to the infusion of cash from last month’s $700-billion Wall Street bailout. “We don’t know yet what’s going to happen in January,” Obama told CNN last week. “None of this can be accomplished if we continue to see a potential meltdown in the banking system.”

Legislatively, the Democrats have a formidable playbook from which to draw. Since taking control of Congress in 2007, the House has passed dozens of bills fulfilling the campaign promises that led to their dramatic takeover the November before. The issues run the gamut — everything from pulling troops out of Iraq to curbing discrimination against gays; from expanding stem-cell research to regulating tobacco as a drug. One bill would force mining companies to pay royalties to Washington for metals harvested from federal lands. Another would expand funding for low-income affordable housing. The list goes on.

The House is the best barometer of party priorities because its rules prohibit filibusters, meaning bills pass with a simple majority. That is, the party in control can do what it pleases — assuming leaders can unite the caucus.

In all of these cases, the White House had either threatened a veto, or applied one.

Under an Obama White House, of course, the veto threat all but vanishes. Meanwhile, Democrats picked up at least six Senate seats Tuesday, while adding at least 19 new members in the House. Several races in each chamber are still too close to call.

Party leaders are vowing not to abuse the new power. Senate Majorty Leader Harry Reid (D-Nev.) said Tuesday night that the election results are “not a mandate for a party or an ideology, but really a mandate for change.”

Still, the changes the Democrats hope to see are pretty overt. Four years after President George W. Bush proclaimed his thin victory over Sen. John Kerry to be a mandate, Democratic leaders will be hoping, at least inwardly, that this year’s historic election constitutes the real thing.

Sen. Barack Obama (Getty Images)

He burst into public attention as Abraham Lincoln did, with a speech. When he next commanded the nation’s attention, last winter in Iowa and New Hampshire, what was remarkable was not only the power of his speaking but the intensity of his audience’s response — and his young audience most of all.

So Barack Obama came to be compared not just to political leaders who were powerful speakers — Lincoln, Winston Churchill and Martin Luther King Jr. -– but also, inevitably, to rock stars. Who else could draw so many rapt young people to a hastily scheduled event? Who else could send them cheering into the night?

Illustration by: Matt Mahurin

But the rock-star parallel always struck me as fundamentally off. Rock stars, since Elvis and Mick Jagger, have usually been demonstrative types. Their full-body excess is part of their appeal.

Not so Obama. He is cool where they are hot. He is precise and elegant and reserved. He knows he packs an emotional wallop, because he always understood that the success of his candidacy signaled, in itself, an astonishing historic transformation of the United States.

It was the latest in the chain of defining national events that began with the Declaration of Independence, was renewed at Gettysburg, given irresistible moral urgency at Montgomery, Birmingham, Selma and the Lincoln Memorial; and codified by Lyndon B. Johnson.

He knew his audiences understood this: You could not be an American and fail to understand it — whether you supported his campaign or opposed it.

Strategically, however, for Obama to have made this explicit, to have elevated it to the focus of his campaign, would have been a mistake. It wasn’t the focus in any event. It was its mythic foundation, but to speak of it directly would be to contravene his strategy.

We are not red and blue America, he would say, we are the United States of America, and the audience would shout its assent, understanding that he also had meant, we are not black and white America, we are United. Obama spoke in racial code, not to evoke bigoted rage, but a vision of multiracial harmony and national greatness.

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As the campaign evolved and the economy collapsed, Obama’s cool contrasted favorably with Sen. John McCain’s lurching impulsiveness. Obama went into the debates with the clear goal of alarming nobody, and, save for those whose alarm was unalterable, he succeeded. Cool ruled.

Stylistically, direct moral appeal was not something Obama felt comfortable with, either. He spoke of “the fierce urgency of now,” not the fierce urgency of justice or equal rights.

The president-elect preserved a certain loose formality, a protective distance from the crowd even as he delivered lines he knew would make them erupt. Many have compared his manner to that of John F. Kennedy — elegant, slim, detached, ironic.

But Kennedy never touched the depths of emotion that Obama excites. For emotional intensity, particularly after JFK was assassinated, the preeminent Kennedy was Bobby, who before the end of his life came to personify the causes of farm workers and Southern blacks and those excluded all across America.

Obama, in that sense, fuses Jack with Bobby — the cool concealing the immense emotional message that he and we know he conveys. It’s hard to think of a comparable figure on the American landscape — of someone so simultaneously hot and cool.

Well, there’s one. A contemporary, and buddy, of Jack’s, who brought a cool, tough exterior, a sense of precision and understatement, to some deeply emotional content. Not a rock star — though he was the daddy of all rock stars.

Sinatra.

Flickr: Tom Lawrence

No, I’m not saying that Obama is mobbed up or that he drinks with the heavyweights or screws every broad around. Not that Sinatra.

I mean the Sinatra who modulates his way around “One for My Baby” or “Last Night When We Were Young,” who keeps it under wraps until the last eight bars and then lets it go. I mean the Sinatra of “I’ve Got You Under My Skin,” who bites off the words joyously, then stands back and lets the band just wail, as Obama, after he delivers the goods, stands back and lets his audience erupt.

I mean the skinny-tie guy, once even skinnier than Obama himself, who was never disheveled, who celebrated the lyrics, who toyed with his crowds, who understood that, in the songs of Porter and Gershwin and Rodgers and Hart, he had works of substance and emotional wallop that he downplayed until, at the climactic moment, he let them explode.

The cool around the hot. The slow-building case and the moral crescendo. The Chairman of the Board and the President-elect. Barack Obama — in the footsteps of Lincoln, King and Sinatra.

Harold Meyerson is editor-at-large of The American Prospect and an op-ed columnist for The Washington Post.