President Barack Obama

Barack Obama, America’s 44^th President, is one of the most brilliant, hard working and innovative politicians to occupy the White House. If the current economic crisis were a typical post-war cyclical recession, there is no doubt that President Obama would be up to the challenge, and lead the United States to renewed growth and prosperity. Alas, we are in different times, with a uniquely devastating and dangerous economic disaster of worldwide scope. Not even as gifted a leader as Barack Obama, I fear, will prove sufficient in arresting the rampaging Global Economic Crisis.

No one can accuse Obama of not recognizing that the U.S. faces a severe economic recession. Most of his administration’s initial activity has centered around crafting policy responses to the recession, primarily involving the unprecedented expenditure of borrowed money in an attempt to revive growth. However, the very character and essence of his administration’s economic policymaking reveals the lack of comprehension of how dire and unique the Global Economic Crisis is on the part of President Obama. At his core, Obama believes that the American economic system is basically sound, but slid into a severe recession because of irresponsible behavior on the part of some actors within the financial oligarchy. Hence, by restoring growth through deficit spending and enacting a new regulatory regime to restrict the destructive greed of some Wall Street tycoons and bankers, we can return to the happy economic days of yore. In effect, Obama is acting like a nostalgia buff, hoping that the correct policies will recapture the solid economic model of pre-George W. Bush America. Unfortunately, this view of America’s political economy is mythological. The U.S. economy was unhinged under the presidency of Bill Clinton as much as it has been under Bush, yet Obama has chosen Clintonites to serve in the most important economic policymaking positions in his administration. Cheerleaders for a failed model will not lead America to a new economic Jerusalem.

A major part of the problem Obama is facing is philosophical. He is following a conventional view of counter-cyclical economics; when a recession occurs, the sovereign can go into debt and use borrowed money to artificially increase demand and thus arrest the decline in growth. Once the recession is arrested, government fiscal policy can return to a more prudent policy of balanced budgets, as restored economic growth eliminates the need for the government to maintain demand. Sounds simple, as this has been enshrined as the recession-fighting bible created by economist Maynard Keynes. The only difference, the Obama administration would argue, is that this recession is much bigger than previous economic downturns, and therefore requires much more significant deficit spending. Otherwise, the Keynesian model remains unaltered.

This perspective by the Obama administration, in my view, is myopic. Like many contemporary politicians and economists, President Obama and his senior economic advisors have misread Maynard Keynes. Contrary to public perception, Keynes was no economic radical, but a centrist in dealing with the challenge of managing economic cycles within a capitalist system. Though Keynes did believe deficit spending was justified as a means to stimulate economies in deep recession, he also advocated budget surpluses during times of relative prosperity. In effect, Keynes believed in “rainy day” economics; in times of plenty you put away a little fiscal cushion that can then be spent during a recessionary period to enable the sovereign to maintain economic demand during a time of private sector contraction and declining tax revenues. This is actually a conservative philosophy that many farmers are familiar with.

In the United States, even during times of sustained economic growth, massive government deficits have been de rigeur during the past nine years, in the process doubling the national debt. There is no rainy day fund to speak of, so the staggering deficits that are now being enacted by the Obama administration are, in my judgement, fiscally unsustainable. Already, the projection for the current fiscal year’s deficit has risen by $200 billion to a stratospheric $1.8 trillion; my own estimate is that it will top $2 trillion. Looking into the future, the current Obama fiscal agenda foresees annual deficits of $1 trillion or more for several years into the future, gambling that the recession will be short-lived, with growth returning as early as the last quarter of 2009, leading to increased tax revenue and declining deficits.

But are we in a recession? The current downturn is already the most protracted and destructive since World War II. However, there is another ingredient that has been added into this toxic economic stew: globalization. We are in a Global Economic Crisis in which synchronized contractions across the world create multiple negative feedback loops that reinforce the underlying negative causation. The subprime collapse in the United States crippled banks in the U.K. and devastated Japan’s export machine; the Eurozone economic contraction is now impacting America’s export driven manufacturers. When China’s exports to America decline, commodity exporters and peripheral economies that supply value-added components to China’s export goods get whipsawed. This phenomenon is occurring at an accelerating pace, despite attempts by the Obama administration to portray minor statistical anomalies to the prevailing trend as “rays of hope” and “green shoots.” Reading tealeaves is no substitute for critical analysis.

The ongoing Global Economic Crisis has proven to be so severe, sustained and virulent that if it is not yet a global depression, it is embarked on that dangerous trajectory. However, another flaw in the Obama administration’s approach is its failure to recognize that a substantial part of the financial system is rotten to the core, and not merely a fundamentally sound system with a few bad applies populating it, who can be restrained by improved regulation. More importantly, the Obama economic team seems to have convinced themselves that “mind over matter” is the best palliative for the nation’s stricken banking system. When a sovereign’s private banks are essentially insolvent and not engaged in normal loan activities, this is another manifestation of an economic depression. Rather than admit the truth, the Obama administration cobbled together a make-believe series of bank stress tests, which supposedly show that America’s banking system, with a few minor problems, is essentially sound and fiscally healthy. This conclusion is an utter fraud, designed to artificially create a climate of economic confidence. It won’t work, and by delaying an honest approach towards the nation’s crippling level of bank insolvency, the policymakers are insuring that the final cost of the inevitable day of reckoning will be far more costly to the taxpayers.

The economist Hernando de Soto has captured the essence of the Global Economic Crisis as few others have. In his view, the Western world, and principally the United States, who have for so long railed against Third World inefficiency and corruption, have created the largest, most toxic shadow economy in the history of human civilization. More than one quadrillion dollars in unregulated financial derivatives paper, according to de Soto, has destroyed inter-bank and financial counterparty trust to such an extent, credit flows have largely frozen despite unprecedented levels of taxpayer-funded borrowing to bailout the global financial system. Nothing short of an honest accounting of the true value of the toxic assets underlying these colossal derivatives products, which equal twenty times the entire world’s GDP, can put the global economy on the road to recovery. Until these unregulated “unknown unknowns” become fully transparent, all other government interventions, including Obama’s massive borrowing binge, are doomed to failure. Sadly, as the bogus bank stress tests reveal, President Barack Obama and his Clinton-era economic advisors have financial transparency as the least important objective on their agenda.

It seems that President Obama, despite his obvious leadership gifts and towering intellect, has chosen to place his faith in a team of advisors who are tied to the Wall Street oligarchy by an umbilical chord than cannot be severed. In a sense, Obama is following the path of the last Soviet leader, Mikhail Gorbachev, who also sincerely wished to resolve his country’s economic problems, but believed that the system was fundamentally sound and only required a modicum of reform to correct its distortions. Only after the collapse of the USSR did Gorbachev conclude that the system itself was unsustainable. Now it appears to this observer that President Obama may be fated to travel the same path as Gorbachev, and like him end up as a valiant failure.

For the second time in his young administration, President Obama will be conducting a prime-time televised new conference. Barack Obama will be addressing the news media at a time of much activity. His Treasury Secretary, Timothy Geithner, just unveiled a new rescue program for the toxic assets crippling U.S. banks. The Geithner plan was widely cheered by Wall Street.

It is expected that most question Barack Obama will be responding to will involve the economic crisis. President Obama has sought to convey a highly active and visible image in responding to America’s financial and economic difficulties. Recently, President Barack Obama was interviewed on the CBS news show 60 Minutes.

Barack Obama will probably maintain his high visibility as the Global Economic Crisis dominates the world’s attention. Obama will soon be joining other world leaders to discuss the economic crisis at the G20 summit in London.

An Iranian mob rampaged in Tehran, the capital of Iran, setting fire to posters with pictures of the United States President-elect, Barack Obama. They also waved Palestinian flags, showing their solidarity with the people of Gaze and hostility towards Israel, which is waging war on Hamas. It is common for Iranian demonstrators to burn effigies or pictures of American presidents in protests. This marked the first time that a foreign protest involved defacing an image of Barack Obama, who is to be sworn in as the 44^th U.S. President on January 20^th.

Iran has often attacked both Israel and the United States. The Iranian leadership has strongly condemned the Israeli military action in Gaza.

In addition to burning a picture of Obama, some of the demonstrators chanted, “Death to Obama,” while marching in the Iranian capital.

Leon Edward Panetta was nominated by President –elect Obama to be the head of the Central Intelligence Agency. The decision by Barack Obama to pick Panetta to head the CIA aroused some controversy, as Leon Panetta has had no previous intelligence experience. However, he has had extensive government experience, especially in Washing D.C., and served as chief of staff to President Bill Clinton.

Obama made two other choices for his national security team and intelligence team. Retired Admiral Dennis Blair

will serve as head of National Intelligence. Barack Obama praised both Panetta and Blair in strong terms. Obama told the media, “they are public servants with unquestioned integrity, broad experience,” adding that these men were “the right leaders to advance the work of our intelligence community.”  

John Brennan, who was former acting director of the National Counterterrorism Center, will be Barack Obama’s White House adviser on counterterrorism.

President-elect Barack Obama, in his weekly radio address, indicated he would be nominating Shaun Donovan to be Secretary of Housing and Urban Development (HUD). Donovan is currently head of New York’s urban housing agency. He had taken a leave of absence to campaign for Barack Obama.

Obama made his announcement on Saturday in his weekly radio and Internet broadcast. Housing and Urban Development (HUD) has been accused of failing to get rid of racial discrimination in the nation’s housing and lending markets. Obama has hopes that Donovan, as Secretary of HUD, would strive to assure that housing is affordable for all Americans and end remaining racial discrimination in housing.

President-elect Barack Obama has announced the names of his top economic advisers at a Chicago news conference. He indicated they would manage a massive economic stimulus package designed to save the U.S. economy from the worst financial crisis since the Great Depression since the 1930s.

The names and positions announced include:

Christina Romer, co-director, National Bureau of Economic Research

Timothy Geithner, currently the president of the New York Federal Reserve, will serve as the next U.S. treasury secretary.

Lawrence Summers, himself a former treasury secretary in the Clinton administration, will be appointed to become the new head of the White House’s national economic council.

Christina Romer of the National Bureau of Economic Research was selected to chair Barack Obama’s Council of Economic Advisers.

During the Chicago press conference, President-elect Obama said he had selected a team that would offer new ideas for confronting the global economic crisis.

Barack Obama stated very emphatically, “We need a big stimulus package that will jolt the economy back into shape. I look forward to working closely with them in the months ahead. And that work starts today, because the truth is, we don’t have a minute to waste. Our financial markets are under stress. While we can’t underestimate the challenges we face, we also can’t underestimate our capacity to overcome them.”

The announcement of Timothy Geithner to head Treasury sent the Dow Jones index up sharply. Geithner, who has also been vice chairman of the interest rate setting Federal Open Market Committee, was very involved in the bailouts of insurance giants AIG and Bear Stearns, and in the decision to allow Lehman Brothers to go bankrupt.

Obama’s top strategist, David Axelrod, said Geithner was “intimately involved with the situation now in his role as president of New York Fed. By temperament and experience, he’s the right man to lead the Treasury now.” Apparently, the stock markets and financial community agree with Axelrod.

At a Chicago news conference announcing his economic team, President-elect Barack Obama urged rapid passage of an economic stimulus bill by Congress, which would provide assistance to the three domestic automakers, among other financial measures.

With 57 days before he is inaugurated as the nation’s 44th president, Barack Obama warned about the ailing economy, saying that, “the economy is likely to get worse before it gets better.” He added that, “most experts now believe that we could lose millions of jobs next year.” Obama also expressed surprise at the big three auto makers, saying that he was surprised they did not have at present any well-conceived plans for recovery prior to asking Congress to approve their urgent request for $25 billion in emergency loans.

It is being reported that New Mexico Governor Bill Richardson, age 61, is to be selected by President-elect Barack Obama as his commerce secretary. Richardson would be the first prominent Hispanic to be appointed to the Obama cabinet. As with other Obama appointees, he was an opponent in the 2008 Democratic presidential primary before withdrawing and becoming one of the first former rivals to endorse Barack Obama.

I t is being speculated that the Richardson nomination, along with others, will be announced by Obama some time after the Thanksgiving holiday. Prior to being elected New Mexico Governor, Bill Richardson had a prominent role in the Bill Clinton administration, serving as UN ambassador and later as energy secretary. In addition, President Clinton had Bill Richardson travel on several important diplomatic missions, including direct talks with Iraqi leader Saddam Hussein and with officials from North Korea involving the nuclear issue. Having been close to Bill Clinton, the fact that he threw his support behind Barack Obama in the Democratic primary instead of Hillary Clinton was viewed by many as a turning point in the Obama presidential campaign. Richardson also actively campaigned for Obama against John McCain, especially among Hispanic voters.

As the economic news goes from bad to disastrous, and the lame-duck President Bush becoming increasingly irrelevant, the world is already turning to President-elect Barack Obama to lead America out of the worst financial crisis since the Great Depression, which he plans to do in part by creating 2.5 million jobs through a major public works program that includes rebuilding roads and bridges and modernizing schools while developing alternative energy sources and more efficient automobiles.

President-elect Barack Obama said, “These aren’t just steps to pull ourselves out of this immediate crisis. These are the long-term investments in our economic future that have been ignored for far too long.”

Obama’s objective is to steer his infrastructure investment plan rapidly through Congress, facilitated by assistance from both political parties, after Barack Obama is inaugurated as the nation’s 44th president on January 20, 2009. In his radio broadcast, Obama indicated that he sees 2.5 million new jobs added by 2011 if his plan is adopted. With the U.S. economy shedding jobs at an alarming rate, it is clear that a jobs creation program is a top priority for the incoming Obama administration.

When Barack Obama announced his presidential victory over John McCain in Chicago on November before a live audience of hundreds of thousands, and a worldwide television audience of perhaps hundreds of millions, he made a unique promise. He told his daughters Sasha and Malia that they had earned a new puppy, which would join them in the White House.

It seems that the whole world is fascinated with the incoming First Family’s search for a new puppy. The topic even arose during president-elect Obama’s first news conference post-election. It appears that this human-interest aspect of the new First Family will continue to attract considerable media and public attention.