Obama on the Tightrope
Image has not been found. URL: /wp-content/uploads/2008/11/obama-speaking2.jpgSen. Barack Obama (D-Ill.)(WDCpix)
With the economy in turmoil, Congress in recess and President George W. Bush all but absent from the economic debate, President-elect Barack Obama again held the national spotlight Wednesday, announcing the newest members of the economic team that will advise him on how to manage the crisis.
In his third press conference this week, Obama named former Federal Reserve Chairman Paul A. Volcker and campaign adviser Austan Goolsbee, an economics professor at the University of Chicago, to head the President’s Economic Recovery Advisory Board. The new panel will help to lift the nation’s recession and stabilize financial markets. Proclaiming that Washington’s policy-making is often “too insular,” Obama said the two experts will bring outside-the-Beltway thinking to the nation’s capital.
Illustration by: Matt Mahurin
“Those who serve in Washington don’t always have a ground-level sense of which programs and policies are working for people, and which aren’t,” the president-elect told reporters in Chicago. “This board will provide that perspective to me and my administration, with an infusion of ideas from across the country and from all sectors of our economy.”
But Obama is walking a tightrope. While elected to the White House, he’s not yet the president. He wants to appear ready to take on the ailing economy come Jan. 20, but he doesn’t want to take responsibility for what happens in December. To assure investors and consumers, he hasn’t opposed the Bush administration’s latest remedial steps to unlock credit markets. But he’s been careful not to take ownership of them either — if only for fear that he’ll be blamed if they fail. Even as he insists that the country “can only have one president at a time,” he is looking more and more like the only guy with the credibility to begin turning the economy around.
Bush has been largely silent about the economy in recent weeks. He made a brief statement Monday about the Citigroup bailout, and even after Treasury Sec. Henry M. Paulson Jr. delivered the news yesterday that the government will inject $800 billion into credit markets, the president did not directly comment on the policy. On Wednesday, as Obama was announcing his new economic advisory board, Bush was pardoning a pair of turkeys named Pumpkin and Pecan.
“Even if he wanted to make a real run at righting the economy, at this point Bush has neither the energy nor the credibility to make it happen,” Eugene Robinson, the liberal Washington Post Op-Ed columnist wrote Tuesday. “Frankly, he comes off as less a lame duck than a cooked goose.”
From a timing perspective, it’s been a terrible stretch for the country to find itself leaderless. Housing prices — once the leading driver of wealth creation — continue to fall, while thousands of homeowners are losing their largest asset to foreclosure each day. Consumer spending, which represents about 70% of economic activity, fell 1 percent in October — the steepest drop since 9/11.
Unemployment rates hit 6.5 percent last month, with that figure may climb to close to 9 percent by the end of next year. In the second week of November, new unemployment claims hit a 16-year high.
As Boston University history professor Bruce J. Schulman pointed out on TWI recently, transitions are always awkward phases on the continuum of Democratic governance. But this is especially true in this dire financial environment.
Obama has said that his first act as president will be enactment of a sweeping economic stimulus package that will include middle-class tax breaks and billions in new spending on infrastructure and green energy projects. The president-elect says the plan would create 2.5 million jobs in the next two years, but he has declined to say how much that proposal would cost, deferring to his newly named economic team. Some economists are floating figures between $500 billion and $700 billion — far beyond the $58-billion rescue package passed by House Democrats in September.
House Speaker Nancy Pelosi (D-Cal.) on Wednesday pointed to the new consumer spending numbers as reason enough for Republican opponents to get on board to pass something this year. In a statement, Pelosi said the Democrats’ proposal “would provide a down payment on creating jobs, helping states avoid deep cuts to health care and essential services.”
Republicans have other ideas. House Minority Leader John Boehner (R-Ohio) is pushing his own version of a stimulus bill, featuring tax cuts as a way to jolt the economy. “Democrats can’t seem to stop trying to outbid each other — with the taxpayers’ money,” Boehner said in a statement this week.
Meanwhile, Congress is set to return to Washington the week of Dec. 8 to consider legislation bailing out America’s wheezing automakers. Earlier efforts to grant $25 billion in emergency loans fell flat in the face of GOP opposition. That resistance only grew stronger this month when the heads of Detroit’s Big Three auto manufacturers appeared before Congress with no specific turnaround plans for their companies.
The automakers have been asked to submit to Congress detailed business plans by Dec. 2, with House and Senate panels expected to hold hearings on those proposals later next week.
Obama had said several times that he supports the Detroit bailout, as long as the companies have viable plans for generating cash and paying back taxpayer loans. But whether the new president is forced to take that up himself in January depends on what Congress can get done next month.