Obama has much to do on economy before taking office

On the eve of the elections, the auto industry reported its worst monthly sales since 1982. Dealers need customers to come back into showrooms as soon as possible, which will happen only once consumer confidence picks up. Consumers also need better access to loans. General Motors is pushing consumers to banks because its own financing arm, GMAC, has decided it won't lend to customers with credit scores lower than 700.

The industry is seeking government funds to ride out the cratering car market. Obama has said he's in favor of some help.

"The industry is going to (the government) with its hands out because there are not a whole lot of other options," says Kevin Tynan, an Argus Research analyst.

Financier Wilbur Ross said the new administration's first move, before Obama is even inaugurated, should be to help fund a deal between GM and Chrysler. They have been working on a plan to merge for weeks but can't come up with the financing to get it done. Ross estimates the government's cost at about $10 billion.

David Cole of the Center for Automotive Research says he believes the industry will get a bailout. If not, one or more automakers could fail, killing 2.5 million jobs in the first year.

By Sharon Silke Carty

Trade:Chinese currency, NAFTA won't be easy

Obama has promised to renegotiate the 1994 North American Free Trade Agreement and get tough with China over its undervalued currency, which gives its exporters a price advantage in world markets. Neither will be easy.

If the U.S. reopens NAFTA, trade partners Mexico and Canada are sure to raise their demands for improvements. Cracking down on China is complicated by U.S. dependence upon Chinese purchases of U.S. Treasuries to finance government borrowing.

The president-elect will also be buffeted by competing economic and political pressures.

On the one hand, there is widespread public sentiment that expanded trade liberalization costs jobs. Yet, exports have been a rare bright spot in an otherwise bleak outlook this year, providing almost all of the economy's forward momentum. Obama must address public angst without choking off beneficial cross-border deals.

"The public is nervous and a little worried about the ability of the country to compete and feels pressured by the rise of other countries," said Edward Gresser, a trade expert at the Progressive Policy Institute, a Democratic-leaning think tank.

Two things are virtually certain in an Obama administration: stronger emphasis on enforcing existing trade deals and expanded efforts to help workers displaced by trade agreements.

By David J. Lynch

  • 1
  • |
  • 2
  • |
  • 3
Join the Discussion
blog comments powered by Disqus
You Might Also Like...