Obama's promises face a rough road ahead
A government mired in debt combined with a recession will make the path to recovery difficult for the president-elect.
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"[Obama] will and should get involved in fiscal-stimulus negotiations" in Congress this year, says Robert Bixby, executive director of the Concord Coalition. He also should have "some input" on the $700 billion financial-rescue package being implemented by the Bush Administration. "You can't have two presidents at once," Mr. Bixby notes. But he considers the unprecedented involvement of the government in finance through the "troubled asset relief program" (TARP) as justifying Obama's inclusion in some degree.Skip to next paragraph
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Peter Morici, an economist at the University of Maryland's business school in College Park, urges Obama to make a "quick selection" of a Treasury Secretary to work with current secretary Henry Paulson on the banking crisis and House Speaker Nancy Pelosi on a stimulus package.
Getting the federal budget into better balance is seen as a longer-term goal.
At the moment, Mr. Riedl sees a "base" deficit of $500 billion in fiscal 2009. Add to this $250 billion in immediate outlays under TARP, a $250 billion drop in revenues because of the recession, and a second stimulus package that could cost $250 billion, and you get a deficit of $1 trillion to $1.5 trillion. So finding money to pay for an Obama program won't be easy.
Obama talks of going through the budget line-by-line to eliminate programs that are not working. Budget experts aren't hopeful he will find big money.
Obama promised a 16-month withdrawal of troops from Iraq, a war costing the United States at least $150 billion a year. But Riedl notes that savings will be less than that sum, since some troops returning home will continue to be paid for and housed by Uncle Sam in the US. Also, some may be sent to Afghanistan.
The US currently spends more on defense than every other nation in the world combined, by some measures. And Rep. Barney Frank (D) of Massachusetts, chairman of the powerful Financial Services Committee, has suggested slashing defense spending by a quarter. That would be big money. But Riedl sees it as "unrealistic."
Nonetheless, Eugene Steuerle, vice president of the Peter G. Peterson Foundation, says tough economic times have historically been periods when "the most important and best government reforms are passed." So he hopes the current turmoil will lead Obama and Congress to find ways to tackle some of unfunded promises in the area of healthcare and retirement and thereby get control of the budget mess.
Maybe, he says, Obama can get "something done" in his honeymoon period in Washington.