Barack Obama faces tough challenges

Barack Obama won’t have much time to celebrate his election as the United States’ 44th president. Although his win is historic as the first African-American elected president, Obama is inheriting major problems both at home and abroad.

Barack Obama won’t have much time to celebrate his election as the United States’ 44th president. Although his win is historic as the first African-American elected president, Obama is inheriting major problems both at home and abroad.

A major global financial crisis, a recession, falling sharemarkets and rising unemployment – all problems Obama must start dealing with immediately. His first major security briefing is scheduled for next week, highlighting how fast the transition process will occur.

While a Congress in the hands of the Democrats will help, Obama must spend the next 10 weeks hurriedly preparing a Cabinet that will help him enact specific policy initiatives to get the US economy moving again.

Economy

Obama’s pet project is his $US75 billion stimulus package, which will provide a $US250 immediate tax cut for US workers and families, an additional $US250 bonus in social security cheques and a $US250 tax cut if the economy worsens. A $US1000 credit to ease higher fuel and energy costs is also on the table.

He also aims to eliminate taxes on unemployment insurance benefits, and is considering helping out the struggling automotive industry.

New tax plans are also on the table, with Obama wanting to raise the nation’s top two tax brackets to 39% and 36% and offer more tax breaks for lower-income earners. He also plans to raise the capital gains tax, but has not indicated a specific number apart from “around 20%”.

He also says he will move quickly to form a team of economic advisers, form a national “jobs and growth fund” and allow the Federal Reserve to lend to state and local governments.

Foreign policy

Obama has attracted criticism for his lack of foreign policy experience, so it is expected vice president-elect Joe Biden will assist him.

The major points of his foreign policy plans have been Iraq and Iran – Obama plans to withdraw troops from Iraq within the first 16 months of his presidency, but has indicated he will consider a flexible timetable if necessary.

Obama also pledges he will take part in diplomatic talks and negotiations with Iran without preconditions – a point on which his Republican opponents criticised him.

He also plans to strengthen the nuclear non-proliferation treaty, expand NATO, help to stop the war in Darfur and double foreign aid to $US50 billion.

Free trade

Obama plans to amend the North American Free Trade Agreement, cease tax breaks given to companies outsourcing jobs overseas, and will only sign new agreements that offer protection for American workers and the environment.

Obama has said he embraces globalisation and free trade, but also “fair trade” – sparking fears of a return to a protectionist trade policy. Obama says he will boost overseas trade, but has also signalled he will be wary to sign new trade agreements that do not foster equality.

“Together, we must forge trade that truly rewards the work that creates wealth, with meaningful protections for our people and our planet,” he said in a speech in Berlin.

Financial markets

It is no secret the financial meltdown on Wall Street boosted Obama’s polling numbers – early exit polls also indicate the falling economy played a large part in his election.

Obama has promised to crack down on unregulated market practices, along with Wall Street reform and a new universal regulator – although no more details have been provided.

He also plans to put fines on fraudulent housing market lenders, amend bankruptcy laws, and has proposed six principles for market reform:

  • Subject financial institutions that borrow from the Government to federal oversight.
  • Reform financial institutions by demanding more liquidity risk requirements.
  • Streamline regulatory agencies into one, or few, universal organisations.
  • Regulate financial institutions, “for what they do, not what they are”, meaning universal requirements for specific lending practices.
  • Crackdowns on market manipulation practices.
  • Create more processes that identify risks, which Obama believes will help avert a future crisis like the 2008 meltdown.

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