Incremental Change We Can Believe In

During the presidential election the domestic policy of most concern to voters, other than the economy, was healthcare. President Obama ran on a campaign of implementing sweeping healthcare reform aimed at improving both efficiency and access. House Majority Whip James Clyburn has been quoted as saying it is better for reform to occur, “incrementally, than to go out and just bite something you can’t chew,” to which Speaker Pelosi had to rebut. While the current financial crisis may offer an opportunity to move towards universal coverage and an overhaul of the U.S. healthcare system, it is more likely that Obama’s first term (at least the first fiscal year) will be witness to incremental reform.

A Regulatory Lesson for the Future

This week the world’s most powerful leaders meet in Davos, Switzerland for the World Economic Forum. As an indication of the changing times, this year’s summit will be attended by 40 heads of state, as compared to only 27 last year. More regulation lies ahead and undoubtedly there needs to be a balance between purposeful, tough regulation and free-market oriented solutions. However, more should not be a synonym for effective when it comes to regulation. This can only be achieved if the financial institutions that have fallen victim to the current crisis are willing to assist regulators and come to terms with the notion that there may be a change in regulatory arbitrage and the world financial system as a whole.

Don’t Forget About Entitlements

Short-term profits, irrespective of potential long-term catastrophes, have pushed the U.S. economy into recession and the financial markets in to a standstill. In response, the Obama administration along with the 111th U.S. Congress is designing a stimulus package in the amount of $800 billion. While the nearsightedness of the financial industry has caused this mess, the Obama administration must not be so quick as to forget this lesson. Spending on healthcare as a whole is currently 16.2 percent of GDP, while Medicare alone is approximately 3.2 percent of GDP. As the economy slows, however, expenditures on healthcare seem to consume an ever-increasing percentage.

Pressure Lending

Many are up in arms about President Bush’s decision to allocate up to $17.4 billion of TARP money to the U.S. automakers, and rightly so. However, this only represents about 5 percent of the first $350 billion of TARP funds. The real issue at hand is why the economy, and specifically credit markets, has yet to improve despite all of the government’s efforts. This week, in a move of what some are calling desperation, the Federal Reserve lowered the fed-funds target rate to between .25 and 0 percent. Fed Chairman Ben Bernanke has pledged to use everything in his arsenal to stem the continued economic downturn. Nobody is quite sure what these additional measures may be, but the Fed has already turned on the printing press, loaned money to banks and backed loans.

A Test for Obama and the World

“Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy.” Vice President-Elect Joe Biden said these words only several weeks ago and it seems, at least in part, that his prophecy has come true. The recent terrorist attacks in Mumbai, India are really a test for not only President-Elect Obama, but for the world. The manner in which all parties involved choose to respond to these attacks may well determine the course of the War on Terror.

Three Cheers for Chapter 11

This week the CEO’s of the Big Three (GM, Ford and Chrysler) begged Congress for money, as they flew into Washington on their private jets. Congress has correctly denied funding and now the Big Three are left on their own. However, Congress should help out U.S. auto manufacturers, but not by providing them money outright. Congress should promote Chapter 11 bankruptcy by the automakers, encourage them to revamp their business models and provide adequate funding and programs for any employees adversely affected by the bankruptcy.

We’re Not Ready To Turn Left

Barack Obama’s win was undoubtedly a proud moment for all Americans, regardless of where you may fall on the political spectrum. The Democratic wins for control of both the executive and legislative branches are a rebuke of the previous years of Republican control. However, let us remember that Obama elected not only as the “change” candidate, but as the pragmatic candidate.

Don't Be Afraid of Deficits

As the candidates continue to talk about the economy, tax policy and ideas for buttressing the financial markets, the federal budget deficit, currently at approximately $455 billion, according to the White House, has come under scrutiny. At the most recent presidential debate, both candidates were asked how they might close the gap in the federal budget by the end of their first term. And what do you know, both candidates skated around the answer. Well, the real answer is that the budget deficit most likely cannot be closed within four years, nor does the deficit as it stands pose a large problem.

The Tax Cut Fallacy

One of the great debates in politics concerns the merits of tax cuts versus tax increases. Traditionally, the Republican Party has preached supply-side economics and tax cuts as means to stimulate growth and investment, whereas the Democratic Party has claimed that tax cuts for only the middle-class will be effective and tax increases elsewhere are beneficial. While both Barack Obama and John McCain have tax plans that are far from perfect, issue should be taken with Sen. Obama’s plan, particularly his claim that 95 percent of workers who earn less than $250,000 will receive a tax cut.

What Are We Voting For?

The polls show that Barack Obama will likely be the 44th President of the United States. John McCain has fallen prey to a struggling campaign with a continuously changing message, a running mate who leaves much to be desired and ultimately an opponent who has run a superior campaign. Yet, for all of the debates, media coverage and hoopla surrounding the presidential election, many Americans are unclear if not down right uneducated about the candidates’ actual policies. At the very least, voters owe it to themselves to read through the candidates’ policy proposals. Are we voting for merely a competent person, or are we voting for a proponent of policies that will effect positive change?