The U.S. Economy and Barack Obama

[dollardaze]

We've all been dealing with the effects of the crisis in our economy. Others before us have also dealt with crises in the economy, previous presidents were able to turn the economy around, but will our President-elect Barack Obama be equal to the task?

Like Franklin Delano Roosevelt and Ronald Reagan, the new president will get a rare opportunity to leave a long-lasting imprint on the U.S. economy. FDR's response to the Great Depression created such enduring institutions as Social Security and federal deposit insurance, which we still rely on to this day. Reaganomics, born of the recession of the early 80's, ushered in a quarter-century of lower tax rates and deregulation.

There will be no shortage of opportunities for Obama to prove himself in 2009. The U.S. is facing the deepest recession in more than 20 years, the worst financial crisis since World War II and a wave of foreclosures.

The new president will probably create a vastly larger economic role for the government. He will also alter the relationship between financial markets and Washington. He'll have to finish the job of reshaping the U.S. banking system begun under Bush, and - like it or not - will probably go down in history as the biggest deficit spender ever.

Obama has proposed having the government invest in energy and manufacturing, while also creating a super-regulator to watch over markets to prevent another catastrophe.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said last month that Congress will enact legislation next year ''comparable to what Franklin Roosevelt and Congress did in the New Deal'' to eliminate lapses that allowed the U.S. credit markets to deteriorate.

The first order of business for Obama will be to get lending restarted and revive the economy.

Unemployment may rise as high as 8% over the next year from September's 6.1%, while gross domestic product could contract at an annual rate of as much as 4% in the last three months of 2008 and again in the first three months of 2009, said Allen Sinai, chief economist at Decision Economics in New York. ''The U.S. is in the middle of a long and deep recession.''

The president-elect is said to be open to another fiscal-stimulus effort, following in the steps of the $168 billion package President Bush signed earlier this year. An effective amount would be $300 billion to $500 billion, said Jan Hatzius, chief U.S. economist at Goldman Sachs, reflecting ''the need to offset the sharp drop in spending relative to income by U.S. households and businesses.''

''The next president is going to have to have two financial SWAT teams,'' said Barry Eichengreen, professor of economics and political science at the University of California, Berkeley. ''One to stabilize the crisis and staunch the bleeding, the other to focus on the issue of how to sustain long-run economic growth.''

[pennypinch]

He was not my choice for the next president but I will say I am ok with a lot of his ideas. The thing is, will he do what he has said he will do once his term begins? I will have to wait and see I guess.