With the U.S. economy reeling and the world’s credit and stock markets under severe strain, President-elect Barack Obama does not have the luxury of waiting until he is President Obama to act.
In the 2 1/2 months before the Illinois Democrat takes office, there likely will be a summit of world leaders on the financial crisis in Washington, a lame-duck session of the outgoing Congress to consider a new stimulus package, a fresh push to conclude a global trade deal, and more payouts in the ongoing $700 billion federal rescue plan for Wall Street.
That’s in addition to a wealth of personnel decisions about Mr. Obama’s new economic team, which will be watched closely by nervous investors.
The markets delivered their own reminder of the thorny problems ahead as both European and U.S. stock markets fell late in the day. The Dow Jones index of industrial stocks was down 5.1 percent to 9,139.27, and all five major U.S. stock indexes lost at least 5 percent.
Investors said troubles in the European banking sector and new U.S. government data showing new softness in the hotel, construction and service sectors in October played at least as big a role in the sell-off as any reaction to the U.S. vote.
John Engler, president and chief executive officer of the National Association of Manufacturers, said the country’s struggling automakers are one sector that can’t wait until Mr. Obama is inaugurated Jan. 21. Without federal help soon, he said, No. 3 car maker Chrysler may not be around for the Obama administration.
“It’s a long time until January,” Mr. Engler said. “Part of the transition has to involve these issues.”
AFL-CIO President John Sweeney, in his own post-election briefing Wednesday, said organized labor has its own short-term economic agenda, which demands action now.
The agenda includes a government “economic recovery package” whose components include an extension of unemployment benefits and food-stamp funding, support for cash-strapped state and local governments, and new infrastructure spending.
“The election was just step one in delivering the change we need,” he said.
Given the enormous power and latitude given to outgoing Treasury Secretary Henry M. Paulson Jr. to administer the $700 billion bailout program, Mr. Obama’s choice for his successor is being given close scrutiny, and that may be one of the first slots filled by the president-elect.
Top candidates are said to include Larry Summers, President Clinton’s last treasury secretary and a former president of Harvard University, and New York Federal Reserve Bank President Timothy Geithner.
However, Mr. Obama drew on an unusually deep economic advisory team during the campaign, including billionaire investor Warren Buffett; Robert Rubin, another treasury secretary under Mr. Clinton; and former Federal Reserve Chairman Paul A. Volcker.
Mr. Obama’s choice will instantly have the primary say in how hundreds of billions of taxpayer dollars will be spent, who will get the money and what control the federal government will demand of companies and industries in return for its aid.
“If the market starts to view [the bailout] as driven by politics and that things are going to change, all the work that has been done so far is going to unravel,” Washington banking lawyer Kevin Petrasic told Bloomberg news service.
Political analysts say Mr. Obama’s sober reaction to the emerging global credit crisis in mid-September provided a major boost to his campaign. Now, however, he must negotiate a tricky transition with President Bush still in power and a number of decisions about to be made that could affect economic policy options through Mr. Obama’s first term and beyond.
Next week, Mr. Bush will host the leaders of the Group of 20 leading industrial and developing economies at a hastily called summit at the National Building Museum in the District. Mr. Bush is resisting sweeping demands for changes in the international financial regulatory system being pushed by French President Nicolas Sarkozy and other European leaders.
Mr. Obama, who has pledged a sweeping reform of the U.S. financial regulatory bodies early in his administration, supports the idea of the summit but has kept his distance as Bush administration officials shape its agenda.
A senior administration aide, briefing reporters on background at the White House Wednesday, said officials are seeking the “views and input” of Mr. Obama’s advisers as they plan the meeting. “The effort will obviously straddle two administrations, and it will be up to the president-elect as to how he would like to have input,” the aide said.
The week after the summit, Congress is due back in Washington for a lame-duck session devoted largely to a short-term stimulus package to jump-start the economy.
Mr. Obama has backed a $175 billion package of direct rebate checks to consumers, tax credits for companies that hire new workers and infrastructure spending.
“We face an immediate economic emergency that requires urgent action,” Mr. Obama said in the waning days of the campaign.
However, any short-term spending bill — assuming Mr. Bush does not veto it — will add to the already mounting longer-term federal budget imbalance, and that could leave the new president facing massive deficits.
The president-elect also may face an immediate test on another tricky economic issue — international trade. Mr. Obama had to fend off attacks from Republicans about his commitment to free trade, and bigger Democratic majorities in both the House and Senate have called into question the fate of pending bilateral trade deals.
Brazilian Foreign Minister Celso Amorim and Australian Trade Minister Simon Crean said Wednesday they will push at the upcoming Washington summit for a deal on the long-stalled Doha round of international trade talks before Mr. Bush leaves office. The round has foundered over the failure to reach a deal to lower barriers to farm products.
Jon Ward contributed to this report.