Obama to Get Running Start With Market Crisis, Wars

By Indira A.R. Lakshmanan and Kim Chipman

Nov. 5 (Bloomberg) -- Barack Obama won't have time to catch his breath.

Having won the longest election in U.S. history, toppling two formidable rivals and succeeding in his improbable quest to become the first African-American president, he will immediately begin the arduous work of turning campaign promises into a viable agenda, aides said.

Illinois Senator Obama inherits neither peace nor prosperity, but rather the toughest environment for a new president since Franklin D. Roosevelt. He takes office with the nation in the grip of the worst economic crisis in three- quarters of a century and embroiled in two foreign wars.

``It's been decades since we've seen something like this, where a president has to deal with major crises in national security and economic policy at the same time,'' said presidential historian Michael Beschloss.

Obama, 47, acknowledged as much in his acceptance speech before at least 125,000 people in Chicago's Grant Park shortly after midnight.

`Planet in Peril'

``Even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime -- two wars, a planet in peril, the worst financial crisis in a century,'' he said. ``There is new energy to harness and new jobs to be created; new schools to build and threats to meet and alliances to repair.''

On the campaign trail, Obama vowed to pursue an ``Apollo- style'' program to transform the country's energy economy, a massive overhaul of the health-care system, and a slew of other proposals to bolster the middle class and restore economic confidence.

When President George W. Bush took office in 2001, he inherited a record budget surplus and a nation at peace. Bush's initial to-do list -- spending that surplus, pursuing a ``humble foreign policy,'' and raising school test scores -- now sounds trivial. By contrast, the Obama administration will begin as economic indicators suggest the U.S. may be headed for the deepest recession in a quarter century and the most complicated financial crisis since the Great Depression. Wages are stagnant, credit is squeezed and costs are escalating.

Deficits

Obama has two months to form a government and prioritize a long list of costly demands at a time of unprecedented deficits. Though FDR had to tackle an unemployment rate four times the current 6 percent jobless figure, he didn't inherit two wars, a global terrorist threat or a world with unstable nuclear-armed states.

The new president is likely to confront stiff resistance from Republicans accustomed to decades of partisan fights in Washington. The task of governing will be both monumental and delicate.

So far, Obama has shown no signs of curbing his ambitious proposals. The turmoil, he has said, makes his agenda for taxes, energy, health care, education and the financial industry more pressing.

``The crisis crystallized in so many ways what was really at stake,'' said Anita Dunn, a senior Obama adviser. ``We had been saying it's a big election about big things.'' For many people, the Wall Street crisis and the $700 billion bailout brought ``into focus how big the challenges are.''

About three weeks ago, as the crises deepened and financial markets reeled, Obama increased the proposed cost of his ``middle-class rescue plan'' to $175 billion from $115 billion.

Advisers said pushing through that stimulus, which would direct funds to financially strapped states, rebuild infrastructure and give a $1,000 tax rebate to eligible families, will be Obama's top priority in January if Congress doesn't pass a comparable plan this month.

Public Confidence

Taking the helm during the Great Depression, Roosevelt's first step was to shore up the confidence of the public. The 32nd president staved off a run on banks and put in place dozens of programs to stimulate the economy, create jobs, regulate the financial system, rebuild infrastructure and create a social safety net.

With Obama's skill at oratory and the unflappable air he projected during the bailout vote, he could likewise send a reassuring message.

``The model should be FDR,'' tamping down panic and letting America know that ``action is essential,'' said political scientist Fred I. Greenstein, author of ``The Presidential Difference: Leadership Style from FDR to George W. Bush.''

The public's unease goes deeper than the immediate crisis. The nation has ``been through some terrible shocks in last 10 years -- a contested election, the 9/11 attacks, two wars, Hurricane Katrina. The president is going to have to heal the country,'' Beschloss said.

Agenda Needed

That will take more than a calm demeanor and rhetorical skill; Obama needs an agenda that achieves promises he has made, and that will require buy-in from financial and military leaders and Congress.

``It's going to be a challenge of leadership. Can government fix anything, can it overcome gridlock?'' said Julian Zelizer, a historian at Princeton University in New Jersey.

Roosevelt invented a measure by which he could be judged: the First 100 Days. It's been the yardstick ever since. Republican Ronald Reagan focused his agenda early; Democrats Jimmy Carter and Bill Clinton didn't.

``FDR had 15 major bills in his famous 100 days, and the Reagan Revolution was all within a year,'' said Alan Lichtman, professor of history at American University in Washington. ``The next president has to try a lot of things and see what works.''

Manageable Goals

Obama must set priorities and select a few manageable goals he can accomplish quickly, historians said. A president's mandate is usually strongest at the beginning, giving him the best chance to pass his agenda and administer bitter medicine.

``You sort which things you can do quickly and which you have to explain to your country will take time,'' said Stephen Hess, an analyst at the Brookings Institution in Washington who has been involved in every presidential transition since Dwight D. Eisenhower's handoff to John F. Kennedy.

``Ronald Reagan could list on the fingers of one hand exactly the things he wanted to do on Jan. 20, 1981,'' Hess said.

David Eisenhower, director of the Institute for Public Service at the University of Pennsylvania's Annenberg School in Philadelphia, said Obama would have to divide programs into three phases: ``Relief, Reform, and Recovery.''

``Relief must begin with banking, the insurance industry. Recovery includes energy, education, foreign policy, relations with NATO, new overtures in the Mideast,'' said Eisenhower, grandson of President Eisenhower. ``Reform would be taxes, health, re-industrialization.''

Foreign Policy

While economic and domestic concerns are front and center, Obama can't leave foreign policy on the back burner. He inherits two wars, a defiant Iran and an ever-present al-Qaeda. Middle East peace talks are flagging, Europe faces an assertive Russia and hurdles remain over an agreement to end North Korea's nuclear program.

In Iraq, Obama has vowed to withdraw most combat troops within 16 months, while sending more forces to Afghanistan, where a resurgent Taliban is staging attacks from tribal areas along the border with Pakistan, an unstable nuclear-armed U.S. ally.

Obama has pledged to work more closely with allies and engage adversaries such as Iran in talks.

Speaking in Ohio on Oct. 13, Obama said his agenda wouldn't ``be easy or come without cost.''

That, he said, means investing in ``energy, education and health care that bear directly on our economic future, while deferring other things we can afford to do without.''

To contact the reporters on this story: Indira Lakshmanan in Washington at ilakshmanan@bloomberg.netKim Chipman in Chicago at kchipman@bloomberg.net