Barack's Brainiacs

In his recent column, New York Times writer, David Brooks writes "Jan. 20, 2009, will be a historic day. Barack Obama (Columbia, Harvard Law) will take the oath of office as his wife, Michelle (Princeton, Harvard Law), looks on proudly. Nearby, his foreign policy advisers will stand beaming, including perhaps Hillary Clinton (Wellesley, Yale Law), Jim Steinberg (Harvard, Yale Law) and Susan Rice (Stanford, Oxford D. Phil.).
The domestic policy team will be there, too, including Jason Furman (Harvard, Harvard Ph.D.), Austan Goolsbee (Yale, M.I.T. Ph.D.), Blair Levin (Yale, Yale Law), Peter Orszag (Princeton, London School of Economics Ph.D.) and, of course, the White House Counsel Greg Craig (Harvard, Yale Law).
This truly will be an administration that looks like America, or at least that slice of America that got double 800s on their SATs. Even more than past administrations, this will be a valedictocracy — rule by those who graduate first in their high school classes."

Obamaniacs are euphoric over the Obama team's intellect factor. Lest they forget, it was a bunch of valedictorians on Wall Street who came up with the brilliant new financial markets of derivatives based upon mortgage backed securities which sent the economy into it's downward spiral. Intellect alone does not guarantee common sense or good policy making. From my persective, Obama's picks so far have been somewhat comforting, not based on their Ivy League pedigrees, but simply for the fact that they are not a group of left wing loons. While they are not conservative, each one is at least a bit more centrist in their views than their leader. (It will also be so entertaining to see Barry and Hil and Bill playing in the same sandbox!)

Obama's pick of Tim Geithner as Secretary of the Treasury sent a reassuring message to the markets on Friday, at a time when confidence is sorely needed. Since the election, the Dow had dropped 16% before rebounding with the leak of Geithner's name as the man who will hold the money bags. But the big elephant still stands in the room, hovering over the markets like a blanket of doom. If the economy is to recover, and not falter into a deep recession or even a depression, simply naming a team is not going to cut it. Neither will promising to invest billions of dollars into infrastructure improvements and green autos to create new jobs, as Obama mentioned in his weekly radio address. The government alone cannot jump start this jalopy. Obama must come out soon and say that he will NOT raise taxes on anyone in this economy. That message alone will pump up confidence, sooth the market jitters, and help get small businesses back on track to create the jobs Americans need. Come on, Obama, do the right thing. JUST SAY IT.

Update: Good news from the NYT- it seems he has said it!

November 23, 2008, 11:00 am — Updated: 11:08 am -->
Obama Considers Delaying Tax Increase
By Sharon Otterman
U.S. President-elect Barack Obama is considering delaying his proposal to repeal the Bush tax cuts for the wealthiest Americans in light of the economic downturn, two aides said on Sunday.
Bill Daley, an adviser to Obama and commerce secretary under former President Bill Clinton, said on NBC’s “Meet the Press” that it “looks more likely than not” that President Obama will delay any tax increase until after 2010, when the Bush cuts for those making more than $250,000 are due to expire.

New Update: David Axelrod, Obama's chief campaign advisor, when interviewed by Chris Wallace on Fox News, waffled on the issue of whether Obama will let the Bush tax cuts simply expire in 2010, or raise taxes in 2009. So again, no certainty about this issue.

Barackonomics Effect on the Markets

The Wall Street Journal featured an op-ed piece this week discussing the impact of the looming Obama presidency on investors. It states that "No President-elect in post-war history has been greeted with a more audible hiss from Wall Street". Indeed, since the election, the Dow has lost 1128 points, almost 12% of its value. Much of this is due to other factors, including dismal earnings reports from the corporate sector, but Obama's stated economic agenda has certainly contributed to pushing the markets lower.

Obama's plan, which he reiterated in his post election press conference, is to raise incomes on those making over $250K, as well as to raise corporate, capital gains, and dividends taxes. As the market reacts with a sell-off to lock in today's lower capital gains taxes, households see their nest eggs shrinking, and panic. The result is lower consumer spending, which is a significant factor in our economy. When businesses make no profits, they close or lay off workers, causing more angst and bad economic news which in turn effects the markets. It's like a Circle of Doom, spiralling ever downward.

Obama had a perfect opportunity to throw the markets a bone during his press conference. When specifically asked whether in this current economic climate he plans to raise taxes, he dodged the question and tapped danced back to his tried and true campaign rhetoric, saying that his plan was for an overall tax cut, and he still believes it is the best plan for the economy. He never answered the question. In some cases, uncertainty is worse than knowing, and this is especially true of the stock market and consumer spending. Uncertainty creates loss of confidence and fear for the future. Obama should have taken the opportunity to reassure markets by saying that he would hold off on any plans for raising taxes, which would effectively stimulate the economy by pricking the balloon of uncertainty which currently hovers over Wall Street.