WASHINGTON -- President-elect Barack Obama faces the worst economy in decades and historic decisions on expanding federal intervention in the marketplace — decisions that won't wait for Inauguration Day.
Even as voters thronged polls Tuesday, data showing a sharp decline in factory orders in September added to recent reports suggesting the U.S. is falling into what could be a prolonged downturn.
Consumer spending, the driver of the U.S. economy, continues to weaken. Aggressive Federal Reserve and Treasury Department actions are starting to thaw credit markets, but banks remain reluctant to lend. Home foreclosures are mounting, credit card and auto loan delinquencies are rising, the world economy is in a swoon and U.S. companies have lined up for federal aid.
Nariman Behravesh, chief economist for IHS Global Insight, says the new president must quickly act to "minimize the depth and duration of the recession … which will get worse before it gets better." A first move should be to call for a "decisive, swift and big economic stimulus" bill focused on public works projects and aid to states, he says.
The new president is also expected to quickly nominate a Treasury secretary. President Bush hosts an international meeting on global finance in mid-November, perhaps giving members of the incoming administration a forum to discuss the economic downturn with counterparts from abroad.
Greg Valliere, chief political strategist at the private Stanford Financial Group, predicts Friday's October employment report will be another "catalyst" to get moving. The report is expected to show a large decline in jobs and an increase in the unemployment rate, already at 6.1%, a five-year-high.
"The key element here is confidence," Valliere says. He expects the president-elect to convene a panel of high-level economists within days and propose a stimulus package. Fed Chairman Ben Bernanke threw his support behind a stimulus package last month, but it's unknown if Congress will hold a rare lame duck session to vote on such a measure.
Obama's team will arrive as Treasury is implementing a $700 billion financial rescue law. The government has started to pump money into banks through a $250 billion stock purchase program, but other parts are being worked out, such as how to provide mortgage relief to homeowners and how to purchase troubled bank assets.
Treasury officials have set up a transition team and allotted space on the second floor of the department for Obama's staff, which can move in immediately. Detailed briefing books are ready to go. "Secretary (Henry) Paulson has been in touch with both candidates for many weeks," Treasury spokeswoman Brookly McLaughlin says. "This won't be starting from scratch."