Inauguration Faces More Than History

The swearing in of Barack Obama makes history as the first US black president. Winning the election with 53% of the vote and riding a hide tide of popularity (79%), he has already been working behind the scenes to make the transition as quickly as possible. 1

He faces a nightmare of problems: the continued and unpopular war in Iraq and Afghanistan, an economic depression, climate change, health care. He comes into office facing a record fiscal deficit--$455 billion for 2008, $1186 billion for 2009...in fact, the CBO's current report shows a continuing deficit through 2019. 2 In addition, the unemployment rate for December was the highest since before 1998. Payroll employment fell by over 1.9 million in the last 4 months of 2008. 3

Last year, 25 banks failed due to tumbling home prices, rising foreclosures, and tighter credit. That's more than in the previous 5 years combined. Two have failed this year already. 4

This year alone, more than $700 billion in corporate loans will come due. Many companies were hoping to borrow more money in order to move that debt further down the road. But the credit market has squeezed them out, just as they have consumers and homeowners. Even companies with strong credit ratings are paying about 5% more than the US govt to borrow money--double the premium they paid a year ago. 5

Where does this leave Obama? He'll have to work with a Congress that is upset with Wall Street for failing to show where the first $350 billion went (though most suspect it purchased other companies, shored up their own debt, and paid internal bonuses). If Wall Streeters fly their corporate jets to the next Congressional session, I hope he impounds them.


Sources:
1. Christian Science Monitor, http://features.csmonitor.com/politics/2009/01/19/american-milestone-obama-inauguration-is-a-moment-of-celebration-reflection/.
2. Congressional Budget Office, http://www.cbo.gov/doc.cfm?index=9957.
3. US Dept. of Labor Bureau of Labor Statistics, http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000 and http://www.bls.gov/news.release/empsit.nr0.htm.
4. http://www.13wmaz.com/article/20090117/NEWS04/90117003/1013
5. International Herald Tribune, http://www.iht.com/articles/2009/01/19/business/debt.1-410735.php.