For Obama, No Time to Wait on the Economy
President-elect Barack Obama’s choices for top positions in his new administration, such as his chief of staff, are drawing all the attention lately. But in the financial world, there’s a growing call for him to do more than just pick new personnel. There’s also a belief that the credit crisis is at such a perilous moment he needs to act before even taking office.
That’s a dramatic departure from the transition process for most new presidencies. But these are unusual times, with the economy on a precipice. There’s little for the White House to do on most policy matters in the next 11 weeks — but 11 weeks is “a lifetime in the financial markets,” said Daniel Gross at Slate. Decisions that may get made now will have long-term consequences, and if Obama is going to end up being responsible for them, he might as well try to weigh in now, according to Gross:
It’s possible that further dramatic efforts won’t be necessary in the next 11 weeks simply because, with all the bailouts, there’s nobody left to fail. But plenty of other things could go wrong. We’ve given the Treasury secretary unprecedented powers to make life-or-death decisions about large financial institutions and to enter into financial arrangements that will last for several years. Given that Obama’s team will be dealing with the decisions Paulson made in August and that they’ll have to deal with the decisions Paulson makes in November and December, it’s imperative for them to get into the rooms where those decisions are being made — now. Think of it this way: If you’re slated to assume control of a mutual fund — say, one that has a concentrated portfolio in large financial companies — in January, and if you’re going to be held accountable for its performance, wouldn’t you want to sit in on the investment committee meetings right now?
David Leonhardt at The New York Times made the same point today:
This year’s election coincided with an important moment in the financial crisis. The credit markets have stabilized in the last few weeks and even improved a bit. But the rest of the economy is deteriorating fairly rapidly. It’s now in danger of falling into a vicious spiral, in which spending cuts by consumers and businesses lead to further layoffs and then more spending cuts.
To prevent that from happening, the Obama administration will need to move quickly — before it takes office — to put together some emergency plans for the financial markets and the broader economy.
Normally this time in a new presidency is filled with the sorts of things we’re seeing right now — recriminations on the losing side, and speculation about who will serve in the new administration. That’s why it’s so unusual to have a growing chorus of calls for Obama to take action on the economy before taking office.
It’s further evidence of the unprecedented nature of the credit crisis we’re in, and of the damage it threatens to do — even in just the next 11 weeks.