Over the last two days every media outlet, newsletter and forecaster have rushed to offer their views on how you the investor will be affected by the election of our next president. Recommendations on how to profit or protect your portfolio from changes in taxes, healthcare, energy, finance, regulation and so on have formed a virtual avalanche of information that appears to me to be largely repetitive and totally useless. I would prefer instead to focus on some of Barak Obama’s own words in his election night address as it relates to the economy that resonated with me.
“There will be setbacks and false starts,” the president-elect warned.
Here, I believe he acknowledges that no one knows what it will take to turn this economy around. We are in uncharted territory and although we have amassed an arsenal of monetary and fiscal tools over the years none of them quite fit the present circumstances. Economies, even those that are under some type of centralized governmental control, rarely respond to political efforts to “jump start” or “kick into gear” or “fully employ” a nation no matter how many resources are thrown their way. God knows, President Roosevelt certainly tried. Many of his ideas, like price controls, faired miserably and actually prolonged the downturn. His New Deal programs, his use of the government as the nation’s employer of last resort did certainly build a lot of bridges, parks and rest stops but in the end failed to pull the country out of depression. It was only the advent of an external event, World War II, which actually turned the United States around.
Under Communism as well, where the government has total control of the means of production, economies rarely performed well. No matter how many midnight knocks on the door, neither Stalin nor those that followed him could ever make their economy produce according to plan. Like the amorphous beast that they are, economies go their own way rarely responding to any influences save their own and taking their own sweet time about it.
“We know that government can’t solve every problem,” Obama admitted.
In exit polls on Election Day over 60% of Americans indicated that the economy was their over-riding issue as they cast their ballot. We selected Barak Obama as the man the majority of us believed could best solve the mounting problems of the financial markets, credit crisis and recessionary economy. Unfortunately, if history is any guide, the economy is the one area that the president has least control over among all our national priorities. So have we have now set ourselves up for overwhelming disappointment and along the way found a new president to blame for not “fixing” an economy like he promised?
“The road ahead will be long. Our climb will be steep.”
If we accept that President-Elect Obama will have his hands full simply responding to the present realities and hopefully preventing further damage from the triple threats—weak credit, crashing markets and sinking economy– that would be a truly Herculean task. Even as you read this, Obama is gathering to his side the very best brains in the country to alleviate the worst of the fallout but in the end the economy will do what the economy will do and all of us including the new president are along for the ride.
“We may not get there in one year or even in one term.”
Maybe in a year or two after the country begins to get back on its feet, then the new administration’s agenda may come to the forefront. Of course much will depend on the lasting impact of this terrible time. Will we have the money to pay for a new health system or renewable energy effort? The budget deficit and nation debt are already at record levels and yet Congress is preparing another multi-billion dollar economic stimulus package. Will circumstances demand another bail-out? No one knows.
“So let us summon a new spirit of patriotism; of service and responsibility where each of us resolves to pitch in and work harder…”
Finally, it’s important to understand that the economy is made up of all of us. You the reader, your boss or employees, the woman down the street or the guy next door. We are not helpless. The credit crisis and stock market problems are largely due to a lack of confidence. Many of us got in over our head—spending too much and saving too little– both on Wall Street and on Main Street. That we can fix. We can change. It just takes time and a willingness to believe. Can we do that?
“Yes we can,” said our new president in his closing statement.