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MAKING CENTS OUT OF THE NEWS
Blog #21
(December 4th, 2008)
OBAMA BEGINS TO SHOW HIS CARDS
By Tom McAllister, CFP™
We are now seeing the first signs of how President-elect Barack Obama will govern. In the face of the financial credit crisis he has named his entire financial team, all bright and experienced. Their awareness of what the Bush administration is thinking and doing bodes well for a smooth administrative transition.
U.S. domestic policy is tightly bound to foreign policy. The financial crisis has clearly demonstrated that the world is very America-centered; our problems quickly spread around the world, and our responses have immediate international effects. In some countries, Obama’s plans and appointments are more important than those of their own governments. With six weeks to go in the Bush administration, Obama news is what bears weight, as markets, by nature, reflect anticipated developments rather than present status.
Current Defense Secretary Robert Gates will be asked to stay on, a move I believe would be very positive. We are, after all, still engaged in two wars, Iraq (under control, in mopping-up stage) and Afghanistan (slipping in spite of the additional troops we have sent in). Tim Geithner comes from the Federal Reserve Bank of New York, where he has participated in crafting the bailouts and other moves to resolve the current credit and economic crisis. So far Obama is signaling continuity in U.S. policy, a very good sign.
For all the campaign rhetoric, the distance between Obama’s policies and McCain’s was actually quite small. McCain tackled Bush’s position on Iraq early on and the administration eventually adopted most of McCain’s suggestions, including the Surge. Obama’s position called for a complete withdrawal by the summer of 2010, and that unexpected changes in the situation could make that date flexible.
Obama understands that his position is difficult politically. While Democrats won substantial victories in Congress, Obama himself won the general election by a fairly thin margin (53%) in the popular vote. The basic structure of American politics remains unchanged, meaning presidents do not have nearly the power people think they have.
In fact, presidents must constantly deal with public opinion. Legislators' first loyalty is to their own careers. Collapsing public opinion polls for a Democratic president can destroy congressmen and senators from that party. Obama must keep Congress on his side, and that means keeping his popularity numbers up, a challenge Obama appears to understand very well.
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