Obama’s 10 Big Challenges

The president-elect faces a recession, a revamping of the world’s financial system and two wars -- just for starters.

By Richard Sammon, Senior Associate Editor, The Kiplinger Letter

November 5, 2008

President-elect Barack Obama won’t have much time to savor his historic victory as the 44th president of the United States. It may be an exaggeration to say that becoming the first African-American president of the United States was easy compared with what comes next, but there’s much truth in it.

That’s why Obama and his aides have been quietly planning the transition and the first 100 days, hoping to use the superb organizational skills that helped win the election to get a new administration up and running in record time.

Expect the president-elect to move quickly on several fronts. In the next several days, he’ll reach out to reassure Republicans, independents and those Democrats who didn’t vote for him. He’ll move to restore public confidence and signal his intentions in Iraq and Afghanistan. The freshness of his election will probably boost optimism among the huge number of Americans eager for change, and Obama will try to channel that into a mandate for many of the things he wants to do.

Mandates are easier claimed than realized, however, even with the large majorities that Democrats will have in the House and Senate. Obama will find that out when he tries to tackle the 10 big challenges he’ll face first.

1. Naming his economic, foreign policy and defense and security teams. He’ll move on this very soon, perhaps within days. The aim is to send a message to the markets and to foreign leaders that a smooth transition -- even if it brings a host of policy changes -- is coming.

2. The economy. The economy will dominate Obama’s first year, and maybe his entire term. He’ll start to put his imprint on the issue within days by urging Congress to pass a stimulus bill in a lame-duck session in November. Obama has called for another round of rebates, aid to states, an extension of unemployment benefits, new spending for roads and other infrastructure needs and a new tax credit for domestic hiring. The president-elect will have to decide how far to go in pushing for what he wants, even before taking office, and how much to compromise with Republicans, who favor a smaller package.

3. Financial market fix. Obama’s economic team will get involved quickly with the implementation of the $700-billion debt rescue plan. Treasury Secretary Henry Paulson has said he wants to involve officials of the new administration in the debt rescue effort as soon as possible. Obama supports giving the Treasury Department and the Federal Deposit Insurance Corp. wide latitude to move rapidly where needed to save teetering institutions and promote credit lending. The unprecedented government intervention will be a major headache for months, if not years.

4. Economic summits. President Bush will consult with Obama on plans for the world economic summit on Nov. 15. The aim of the meeting is to set goals for a new worldwide financial regulatory framework, and foreign leaders will want to be sure that Obama and Bush are on the same track. The meeting will bring to Washington two dozen world leaders, many of whom may get a chance to meet privately with the president-elect.

5. Naming remaining Cabinet. Immediately after naming his economic and national security teams, Obama will get to work on the rest of the Cabinet. His transition team has already narrowed the list of potential picks, and relatively early decisions are likely. He’ll name some Republicans to show he’s serious about wanting to end the partisan divides that infect Washington. All in all, Obama has about 5000 political appointees to name, as well as ambassadors. About one in five requires Senate confirmation, a process that takes time.

6. Iraq and Afghanistan. Obama will meet soon with military commanders and the joint chiefs of staff to plan an orderly reduction of troops from Iraq and an increase of troops in Afghanistan. General timelines will be mentioned, but no firm deadlines will be set. The U.S. will have a significant presence in Iraq for a few years yet.

7. Regulatory environment. Obama will try to reverse many late Bush initiatives and then set to work on several changes aimed at tightening regulations at the Securities and Exchange Commission for investment banks, hedge funds and credit rating firms.

8. Setting a legislative agenda. Obama’s first challenge will be to unify Democrats behind his agenda, rather than be pulled along by congressional leaders, who have a long list of pent-up priorities. Obama will have to decide whether to move quickly on major issues such as health care, climate change, energy and tax plans or aim lower initially and get some legislative wins under his belt on less controversial matters such as children’s health care, stem cell research and a new federal aviation law. Best bet is that Obama will try to set a bold agenda, but move cautiously to rack up some early wins. Republicans will want to cooperate to some extent rather than risk getting tagged as obstructionists, but they will stick together and block some moves, lest they appear irrelevant to their supporters.

9. Dealing with the deficit. It will haunt his domestic plans, requiring him to scale back on investments in green technology research, student loan assistance and possibly a middle class tax cut. He won’t scrap his ideas, but some will be pared back and delayed. It’s possible a staggering $1-trillion deficit will be on the books next year, due to the financial and housing market rescue.

10. Foreign relations. Obama is unlikely to start with a flurry of foreign trips, but he will need to establish good initial communications and relations as president-elect with allies the world over. He’ll turn early to the Palestinian issue, as well as with the threat of a nuclear Iran.

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