OBAMA
Racial Barrier Falls as Voters Embrace Call for Change
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The Presidential Race
By KATHARINE Q. SEELYE “Change has come to America,” said Mr. Obama in his speech.
McCain Loses as Bush Legacy Is Rejected
By ADAM NAGOURNEY Barack Hussein Obama was elected the 44th president of the United States, as the country chose him as its first black chief executive.
The Challenge
Speeches: For Obama, No Time for Laurels; Now the Hard Part
By PETER BAKER No president since before Barack Obama was born has ascended to the Oval Office confronted by the accumulation of seismic challenges awaiting him.
Readers’ Pictures of Election Night Parties
What’s Your Election State of Mind?Democrats Widen Senate Edge to Solid Majority
By DAVID M. HERSZENHORN Democrats expanded their slim control of the Senate to a solid majority when they picked up at least five seats.
The Promise
For Many Abroad, an Ideal Renewed
By ETHAN BRONNER It’s hard to overstate how fervently vast stretches of the globe wanted the election to turn out as it did.
Text of Nelson Mandela’s Letter to Senator Obama
5 November 2008.
November 6, 2008
Election Unleashes a Flood of Hope Around the World
By ALAN COWELLFrom the front lines of Iraq to Harry’s Bar in Paris, the election of Senator Barack Obama unlocked a floodgate of hope.
November 6, 2008
Obama Wins Election; McCain Loses as Bush Legacy Is Rejected
By ADAM NAGOURNEYBarack Hussein Obama was elected the 44th president of the United States on Tuesday, as the country chose him as its first black chief executive.
November 5, 2008
Burned Before, Networks Prove Reluctant to Name Next President Early
By JACQUES STEINBERGMindful of having been thrown off course in 2000 and 2004, television networks sought to balance caution with a concern that they not be beaten in the reporting of results by a competitor.
November 5, 2008
Voter Polls Find Obama Built a Broad Coalition
By JACKIE CALMES and MEGAN THEESenator Barack Obama drew more support in Tuesday’s election than any recent candidates of the Democratic Party among a broad range of demographic groups.
November 5, 2008
Celebration and Sense of History at Chicago Party
By JOHN M. BRODER and MONICA DAVEYChicagoans converged on Grant Park to exult in the election to the presidency of a man they adopted as one of their own.
November 5, 2008
Remembering Days When Obama Talked Pitching
By ALAN SCHWARZAs a fellow prominent member of Chicago’s black community, White Sox General Manager Kenny Williams considers Barack Obama a friend.
November 5, 2008 The Moment
A Time to Reap for Foot Soldiers of Civil Rights
By KEVIN SACKFor some African-Americans, the trip to the polls on Tuesday was the culmination of a lifelong journey.
November 5, 2008
Across Ohio, Tough Battle Is Fought by Campaign Volunteers for Both Parties
By MICHAEL POWELL and LARRY ROHTERSome early reports in Ohio pointed to heavy Republican turnout, but it was hard to escape the impression that Barack Obama had marshaled more forces more visibly.
November 5, 2008 The Promise
For Many Abroad, an Ideal Renewed
By ETHAN BRONNERIt’s hard to overstate how fervently vast stretches of the globe wanted the election to turn out as it did.
November 5, 2008
Near-Flawless Run Is Credited in Victory
By ADAM NAGOURNEY, JIM RUTENBERG and JEFF ZELENYThe disciplined and nimble Obama team marched through a presidential contest of historic intensity making remarkably few stumbles.
November 5, 2008 Op-Ed Columnist
Finishing Our Work
By THOMAS L. FRIEDMANLet every child and every citizen and every new immigrant know that from this day forward: Everything really is possible in America.
November 5, 2008 The Challenge
For Obama, No Time for Laurels; Now the Hard Part
By PETER BAKERNo president since before Barack Obama was born has ascended to the Oval Office confronted by the accumulation of seismic challenges awaiting him.
November 5, 2008
America Followed Obama Over the Racial Divide
By RACHEL L. SWARNSMillions of voters put their faith and the future of their country into the hands of a 47-year-old black man who made history both because of his race and in spite of it.
November 5, 2008 News Analysis
Now, Promises to Keep, and Divides to Be Bridged
By PATRICK HEALYBarack Obama must prove that his historic candidacy is not his high point by delivering on promises of bipartisan reform.
November 5, 2008 Editorial
The Next President
Barack Obama won the election because he saw what is wrong with this country: the utter failure of government to protect its citizens.
November 5, 2008
Ten Questions For Election Day - Vaughn Ververs, CBS News
Curtain Finally Falls on the Race - Ben Smith & Jonathan Martin, Politico
Polls Show Obama With Clear Advantage - Dan Balz, Washington Post
Four Election Day Scenarios - Carl Cannon, Reader's Digest
Obama Campaign Instills New Pride - Eugene Robinson, Detroit News
McCain the Choice for Freedom, Prosperity - Deroy Murdock, Union Leader
Four Reasons to Vote for Obama - James Fallows, The Atlantic
We Could Be In for a Lurch to the Left - Fred Barnes, Wall Street Journal
Obama's Challenge is to Convince the Country - Kevin Drum, Mother Jones
The Ghosts in Grant Park - Daniel Flynn, City Journal
Why American Youth Will Vote - Courtney Martin, The American Prospect
Abortion, The Silent Issue - Lisa Miller, Newsweek
Economy Looms Over Victor - Davis, Weisman & Aeppel, Wall St. Journal
Is Obama Swiping the Tax-Cut Issue? - Larry Kudlow, NRO
Today's Certain Loser: President Bush - Steve Chapman, Chicago Tribune
A Dark Secret: I Still Like President Bush - Andrew Breitbart, Wash Times
Preparing for First Blue President - Gideon Rachman, Financial Times
Curtain Finally Falls on the Race - Ben Smith & Jonathan Martin, Politico
Polls Show Obama With Clear Advantage - Dan Balz, Washington Post
Four Election Day Scenarios - Carl Cannon, Reader's Digest
Obama Campaign Instills New Pride - Eugene Robinson, Detroit News
McCain the Choice for Freedom, Prosperity - Deroy Murdock, Union Leader
Four Reasons to Vote for Obama - James Fallows, The Atlantic
We Could Be In for a Lurch to the Left - Fred Barnes, Wall Street Journal
Obama's Challenge is to Convince the Country - Kevin Drum, Mother Jones
The Ghosts in Grant Park - Daniel Flynn, City Journal
Why American Youth Will Vote - Courtney Martin, The American Prospect
Abortion, The Silent Issue - Lisa Miller, Newsweek
Economy Looms Over Victor - Davis, Weisman & Aeppel, Wall St. Journal
Is Obama Swiping the Tax-Cut Issue? - Larry Kudlow, NRO
Today's Certain Loser: President Bush - Steve Chapman, Chicago Tribune
A Dark Secret: I Still Like President Bush - Andrew Breitbart, Wash Times
Preparing for First Blue President - Gideon Rachman, Financial Times
Editorials
Amazing Race of '08 Arrives at Finish Line - USA Today
Vote for Obama & Seismic Change - New York Daily News
Obama's Agenda: Reality vs. Rhetoric - New Hampshire Union Leader
Electoral Lessons - Rocky Mountain News
Transcripts & Speeches
Obama's Victory Speech - Barack Obama
Obama Interview with Katie Couric - CBS Evening News
Interview with Cindy McCain - Larry King Live
Panel: Will It Be An Upset or Landslide? - Special Report w/Brit Hume
Analysts Look at the Final Polling Numbers - The NewsHour
PRESIDENT-ELECT OBAMA...
"CHANGE HAS COME TO AMERICA"
• • • • • • • • • • • • • • • • • • • • • 
OBAMA'S VICTORY SPEECH... WATCH IT... READ IT...
McCain Concedes: "This Campaign Was And Will Remain The Great Honor Of My Life"
THE RESULTS: STATES FOR OBAMA, STATES FOR MCCAIN...
SENATE, HOUSE RACE RESULTS
NBC: DEMS PICK UP 24 HOUSE SEATS... 5 NEW SENATE SEATS... MORE RACES COMING IN...
HOUSE: GOP's Chris Shays Loses Congressional Seat In Connecticut... GOP's Michele Bachmann Fends Off Challenge From Elwyn Tinklenberg In Minnesota... SENATE: GOP'S Liddy Dole Loses Seat In North Carolina To Democrat Kay Hagan... GOP Senate Leader McConnell Re-Elected In Kentucky... Democrat Al Franken, GOP's Norm Coleman Locked In Nail-Biter In Minnesota... Democrat Tom Udall Wins New Mexico... Democrat Shaheen Wins New Hampshire... Democrat Warner Wins Virginia... Democrat Mark Udall Wins Colorado</h5>
"CHANGE HAS COME TO AMERICA"
• • • • • • • • • • • • • • • • • • • • • OBAMA'S VICTORY SPEECH... WATCH IT... READ IT... McCain Concedes: "This Campaign Was And Will Remain The Great Honor Of My Life"
THE RESULTS: STATES FOR OBAMA, STATES FOR MCCAIN...
SENATE, HOUSE RACE RESULTS
NBC: DEMS PICK UP 24 HOUSE SEATS... 5 NEW SENATE SEATS... MORE RACES COMING IN...
HOUSE: GOP's Chris Shays Loses Congressional Seat In Connecticut... GOP's Michele Bachmann Fends Off Challenge From Elwyn Tinklenberg In Minnesota... SENATE: GOP'S Liddy Dole Loses Seat In North Carolina To Democrat Kay Hagan... GOP Senate Leader McConnell Re-Elected In Kentucky... Democrat Al Franken, GOP's Norm Coleman Locked In Nail-Biter In Minnesota... Democrat Tom Udall Wins New Mexico... Democrat Shaheen Wins New Hampshire... Democrat Warner Wins Virginia... Democrat Mark Udall Wins Colorado</h5>
Arianna Huffington: Obama Wins: Why All Americans Have a Reason to Celebrate
Even if your candidate didn't win tonight, you have reason to celebrate. We all do. Barack Obama's impressive victory says a lot about America. Because tonight voters decided that they didn't want to look back. They wanted to step into the future. And they turned out in unprecedented numbers to make sure that no amount of scrubbed rolls, malfunctioning machines, endless lines, or polling places running out of ballots would block the way. The history of America is studded with great breakthroughs followed by decades of consolidation and occasional regression. Tonight's victory proclaims the end of the dark years of the Bush regression. It's time for another American breakthrough.
Read Post
An Obama Victory Will Itself Reassert US Leadership: First Person of Color to Govern Any Country with a White Majority, Ever
Paul Abrams, 11.04.2008
The election of an African-American man to the presidency is an achievement for which no description is hyperbole: earthquake, transformational, monumental, whatever your pleasure.
Read Post
What President Obama Owes A Populace That's Rightfully Scared About Its Economic Future
by Alvaro Vargas Llosa
Yes, We Did: America Finally Chose To Practice What It Preaches To The Rest Of The World
by E.J. Dionne, Jr.
Where This Fits In To The Sometimes Great, Sometimes Thorny History Of Our Nation
by Jonathan Cohn
TNRtv: How Obama Avoided Becoming The 'Black Candidate' In This Election
by Noam Scheiber
I've Worked For Democrats. But I'm The Son Of A Navy Pilot. And I Couldn't Make My Choice Until I Walked Into The Voting Booth.
by Stephen Rodrick
How Obama Schooled Me On Race, And Other Stories From My Year On The Campaign Trail
by Alvaro Vargas Llosa
Yes, We Did: America Finally Chose To Practice What It Preaches To The Rest Of The World
by E.J. Dionne, Jr.
Where This Fits In To The Sometimes Great, Sometimes Thorny History Of Our Nation
by Jonathan Cohn
TNRtv: How Obama Avoided Becoming The 'Black Candidate' In This Election
by Noam Scheiber
I've Worked For Democrats. But I'm The Son Of A Navy Pilot. And I Couldn't Make My Choice Until I Walked Into The Voting Booth.
by Stephen Rodrick
How Obama Schooled Me On Race, And Other Stories From My Year On The Campaign Trail
U.S. Decisively Elects First Black President Barack Obama rides reformist message and exhortation of hope to lead a tide of Democratic victories.
Robert Barnes and Michael D. Shear 6:40 a.m. ET
Hard Choices and Challenges Follow Not since the Great Depression has a new president been confronted with the challenges Obama will face.
Dan Balz
Robert Barnes and Michael D. Shear 6:40 a.m. ET
Hard Choices and Challenges Follow Not since the Great Depression has a new president been confronted with the challenges Obama will face.
Dan Balz
History Gives Way to Its Future 
Magnitude of win suggests the country might be in a gravitational pull toward a rebirth.
Kevin Merida
Magnitude of win suggests the country might be in a gravitational pull toward a rebirth.
Kevin Merida
Revelers Swarm the Streets of Washington
Following Obama's victory, thousands converge on downtown Washington with chants of "Yes We Can."
Bill Turque | 6:11 a.m. ET
Financial Earthquake Propelled Obama
The candidate, criticized as too cool, too cerebral and too detached, suddenly had opportunity to show those qualities to be presidential.
Anne E. Kornblut | 4:42 a.m. ET
Republicans are shut out on both ends of Pennsylvania Ave. and leaders gird for recriminations.
Michael Abramowitz
McCain: Embrace Obama
Following Obama's victory, thousands converge on downtown Washington with chants of "Yes We Can."
Bill Turque | 6:11 a.m. ET
Financial Earthquake Propelled Obama
The candidate, criticized as too cool, too cerebral and too detached, suddenly had opportunity to show those qualities to be presidential.
Anne E. Kornblut | 4:42 a.m. ET
- Many Factors Push Voters to Obama
- Columns: Milbank | Broder | Shales
Republicans are shut out on both ends of Pennsylvania Ave. and leaders gird for recriminations.
Michael Abramowitz
McCain: Embrace Obama
President Obama
Editorial: A Momentous Occasion
Dionne: Time to Hope Again
Gerson: Hail to the Chief
Toles: Delayed Ratification
- Jeff Flake: The GOP, Deep in the Wilderness
- Parker: Not the Worst of Times | McCain's Grace
- Marcus: Can the Dems Resist Overreaching?
- Ignatius: What Historic Really Means
- Telnaes: Bush and Cheney Pack It In
Obama's Next Challenge
E.J. Dionne | President-elect needs calm confidence and quick achievements to sustain support. Can he unite us? | Parker's Take.
- God Vote: Obama's Faith and Values Prevail
- Robinson: Win or Lose, Historic Day for Obama
- Analysis: Kaiser and Fisher Weigh the Results
Greetings from RGE Monitor!
The 2008 U.S. Presidential election was historic itself owing to the candidates’ profile. But the timing of the elections as the U.S. and global economy are in the midst of the worst financial crisis and recession in decades reminds us of the Great Depression era and the 1980s recession when incoming Presidents Roosevelt and Reagan faced immense challenges to cure the economy’s woes.
By the time Obama takes his oath in January 2009, he will face an economy which is still in a middle of a severe and prolonged recession where households will continue to face unaffordable mortgage and other debt, declining value of homes (that financed their consumption all these years), risk of debt default or foreclosure, tight access to credit with stringent borrowing conditions, erosion of their retirement savings amid the bearish stock market, over a million lay-offs taking the unemployment rate to 7-8% and critical foreign policy challenges.
Therefore, immediate challenges for Obama will include cushioning the consumers (who account for over two thirds of GDP) from the economic slowdown by means of a large fiscal stimulus package and acting on a government guaranteed mortgage modification[/size][size="3"]program. In fact, he has already called for fiscal stimulus in the form of grants for state and local governments, infrastructure spending to create jobs, scrap tax on unemployment insurance, tax cuts for lower income-groups and small businesses, tax credits for firms that create jobs and government aid for the ailing auto industry. Some of the tax cuts would be financed by taxing the windfall profits of oil companies. Part of his program would allow households to draw up to $10,000 from retirement funds during 2008-09 without any tax penalty. Obama also called for a ninety-day moratorium on foreclosures, modification of bankruptcy laws, a $10 bn foreclosure-prevention fund and 10% mortgage tax credit for the middle-class. But more importantly he has emphasized preventing taxpayer funded bailout of banks and giving golden parachutes to CEOs of failing institutions. He has also strongly endorsed greater financial sector oversight, control and reporting with the creation of a financial market oversight commission to oversee liquidity, capital and disclosure requirements and plans to streamlining regulatory agencies to prevent overlap and assign greater role to the Securities and Exchange Commission (SEC) to prevent market manipulation and to the Federal Reserve to carry out regulation.
The Democratic Congress will also influence on asset markets, business sentiment and financial sector regulation, as well as on the country’s energy policy and oil sector, health insurance and pharma sector, tax incidence on high income-groups and corporate sector, pre-conditions under trade talks and role of labor unions.
Tax Policy and Fiscal Deficit
Obama will face a swelling fiscal deficit which might be pushed over $1trillion in the next few years. Mounting fiscal costs of the housing and financial sector bailout and fiscal stimulus measures to sustain aggregate demand will impact the budget while the downturn puts a dent in tax revenues. Ballooning Medicare and Social Security bills will only add to his challenges.
A redistribution-oriented tax policy which gives larger tax cuts to a greater number of low and middle-income groups while raising taxes on the high-income group is at the center of Obama’s proposals. When Bush’s tax cuts expire in 2011, Obama plans to raise the federal individual income tax rate from the current 33% and 35% to 36% and 39.6% for the over $200,000 and $250,000 income-groups respectively. Tax cuts would be kept at the current rate for the rest of the income groups. However, the total tax incidence might be higher when combined with the State and other taxes. The new administration also plans to remove various exemptions and deductions for the high-income groups while extending several tax breaks and credits for the low and middle-income groups, retirees, homeowners, and students.
For the corporate sector, the plan is to cut the tax rate to below 35% and act stringently to broaden the corporate tax base and reduce loopholes, crack down on international tax havens and tax distortions and have a shareholder vote on CEO pay. The plan also includes tax breaks for firms that keep headquarters in the U.S. Capital gains and dividend tax rates are expected to go up to 20% for the above $250,000 income group. Moreover, carried interest of private equity and hedge-funds will be taxed as ordinary income (at a higher rate) rather than as capital gains.
In order to finance the Social Security shortfall from the oncoming fiscal burden of baby boomers, the new president plans to raise the earnings cap on payroll taxes from the current $102,000 income cap to the over-$250,000 income-group. The Social Security plan will also include a job-portable and tax-deferred Retirement Fund.
While Obama has pledged to follow the pay-as-you-go rule to contain the fiscal deficit, his proposals to increase spending on lower and middle income groups, infrastructure, research and technology would nevertheless raise the national debt with possible impact on Treasury yields and sources of debt financing.
A Democratic Congress might strengthen the stance to raise taxes especially amid criticism that recent tax cuts dented the fiscal deficit, created investment distortions, and raised income and wealth inequality. But the economic slowdown might limit or delay the administration’s ability to raise taxes. Moreover, there have been concerns about possible impact of these policies on U.S. competitiveness and impact on investment and small businesses.
Health Care Reform
In a country with around 47 million uninsured and the middle-class battling with rising health insurance premiums and job-immobile coverage, Obama will face an immense challenge to undertake the impending health care reform and ensure quality healthcare - that presently fails to match with even other developed countries. The President has endorsed a universal health insurance coverage which will have mandates only for children. The plan includes the creation of a regulated National Health Insurance Exchange where individual insurance can be purchased. Low and middle-income households will benefit of subsidized premiums. Firms that do not offer insurance to their employees will face a tax penalty. The improvement in the insurance coverage, in the next few years, might come with a high price tag.
Trade Policy
Regarding trade, Obama has pressed on including on labor and environmental standards in trade agreements. He has also proposed to raise duties on Chinese imports to offset the undervalued Yuan and dumping of goods and also take measures against their violation of intellectual property rights. Part of the plan also includes greater scrutiny of investments by Sovereign Wealth Funds.
Even as the global recession is increasing risk of slowdown in global trade and possible rise in protectionism, this might be exacerbated by a Democratic Congress that favors conditional trade agreements. The current financial crisis and rising significance of Sovereign Wealth Funds might also increase Congress’ aversion to financial globalization and inward foreign investment. But aversion to trade might be overrated as they realize the risk of unilaterally withdrawing from global trade.
While fair trade might be the way for survival ahead, U.S. insistence on non-tariff barriers to protect some sectors and jobs from import competition might isolate it from trade deals and possible gains from multilateral trade talks.
Labor and Middle-Class
However, the most important and significant challenge that Obama will face is alleviating the American middle-class woes due to the recession but also due to the impact of globalization on workers in the recent years. While the lower and middle-income groups have benefited from trade via cheaper imports, the net benefits from globalization are still being heavily debated.. In the most recent years, real wages have remained stagnant for the middle-class in spite of rising cost of living.
In this respect, Obama has offered to raise the minimum wage adjusted for inflation and introduce laws to make organizing unions easier. He has proposed to reform the Trade Adjustment Assistance, wage insurance and worker retraining programs.
Foreign Policy
While economic policy issues make take the fore and constrain foreign policy, many global leaders will be watching the new foreign policy team for clues of the new administration’s priorities. No shortage of challenges await – a resurgent Russia resenting NATO’s involvement in its near abroad, an Iran that remains dedicated to nuclear proliferation despite sanctions etc. Obama’s foreign policy vision has centered around multilateralism and revived diplomacy - something for which European allies have been longing - to further US interests at a time when the U.S. military is engaged in two wars. Iraq and Afghanistan will likely consume much of the administration’s focus - Obama has pledged to withdraw troops from Iraq within 16 months of taking office and counter resurgent Qaeda and Taliban forces in Afghanistan. Meanwhile, economic and not political ties may continue to define the U.S. relationship with key Asian economies, including China, its largest creditor.
But finding common ground with China, the second largest consumer and importer of oil, may be required to meet energy policy and anti-climate change goals. Obama has stressed conservation and use of alternative fuels to meet America’s energy needs in order to reduce US oil imports and its trade deficit. However, the lower price of oil and worsening economic outlook expenditures may reduce some of the political will around cap and trade policies as well as reducing pressure to begin offshore drilling.
The 2008 U.S. Presidential election was historic itself owing to the candidates’ profile. But the timing of the elections as the U.S. and global economy are in the midst of the worst financial crisis and recession in decades reminds us of the Great Depression era and the 1980s recession when incoming Presidents Roosevelt and Reagan faced immense challenges to cure the economy’s woes.
By the time Obama takes his oath in January 2009, he will face an economy which is still in a middle of a severe and prolonged recession where households will continue to face unaffordable mortgage and other debt, declining value of homes (that financed their consumption all these years), risk of debt default or foreclosure, tight access to credit with stringent borrowing conditions, erosion of their retirement savings amid the bearish stock market, over a million lay-offs taking the unemployment rate to 7-8% and critical foreign policy challenges.
Therefore, immediate challenges for Obama will include cushioning the consumers (who account for over two thirds of GDP) from the economic slowdown by means of a large fiscal stimulus package and acting on a government guaranteed mortgage modification[/size][size="3"]program. In fact, he has already called for fiscal stimulus in the form of grants for state and local governments, infrastructure spending to create jobs, scrap tax on unemployment insurance, tax cuts for lower income-groups and small businesses, tax credits for firms that create jobs and government aid for the ailing auto industry. Some of the tax cuts would be financed by taxing the windfall profits of oil companies. Part of his program would allow households to draw up to $10,000 from retirement funds during 2008-09 without any tax penalty. Obama also called for a ninety-day moratorium on foreclosures, modification of bankruptcy laws, a $10 bn foreclosure-prevention fund and 10% mortgage tax credit for the middle-class. But more importantly he has emphasized preventing taxpayer funded bailout of banks and giving golden parachutes to CEOs of failing institutions. He has also strongly endorsed greater financial sector oversight, control and reporting with the creation of a financial market oversight commission to oversee liquidity, capital and disclosure requirements and plans to streamlining regulatory agencies to prevent overlap and assign greater role to the Securities and Exchange Commission (SEC) to prevent market manipulation and to the Federal Reserve to carry out regulation.
The Democratic Congress will also influence on asset markets, business sentiment and financial sector regulation, as well as on the country’s energy policy and oil sector, health insurance and pharma sector, tax incidence on high income-groups and corporate sector, pre-conditions under trade talks and role of labor unions.
Tax Policy and Fiscal Deficit
Obama will face a swelling fiscal deficit which might be pushed over $1trillion in the next few years. Mounting fiscal costs of the housing and financial sector bailout and fiscal stimulus measures to sustain aggregate demand will impact the budget while the downturn puts a dent in tax revenues. Ballooning Medicare and Social Security bills will only add to his challenges.
A redistribution-oriented tax policy which gives larger tax cuts to a greater number of low and middle-income groups while raising taxes on the high-income group is at the center of Obama’s proposals. When Bush’s tax cuts expire in 2011, Obama plans to raise the federal individual income tax rate from the current 33% and 35% to 36% and 39.6% for the over $200,000 and $250,000 income-groups respectively. Tax cuts would be kept at the current rate for the rest of the income groups. However, the total tax incidence might be higher when combined with the State and other taxes. The new administration also plans to remove various exemptions and deductions for the high-income groups while extending several tax breaks and credits for the low and middle-income groups, retirees, homeowners, and students.
For the corporate sector, the plan is to cut the tax rate to below 35% and act stringently to broaden the corporate tax base and reduce loopholes, crack down on international tax havens and tax distortions and have a shareholder vote on CEO pay. The plan also includes tax breaks for firms that keep headquarters in the U.S. Capital gains and dividend tax rates are expected to go up to 20% for the above $250,000 income group. Moreover, carried interest of private equity and hedge-funds will be taxed as ordinary income (at a higher rate) rather than as capital gains.
In order to finance the Social Security shortfall from the oncoming fiscal burden of baby boomers, the new president plans to raise the earnings cap on payroll taxes from the current $102,000 income cap to the over-$250,000 income-group. The Social Security plan will also include a job-portable and tax-deferred Retirement Fund.
While Obama has pledged to follow the pay-as-you-go rule to contain the fiscal deficit, his proposals to increase spending on lower and middle income groups, infrastructure, research and technology would nevertheless raise the national debt with possible impact on Treasury yields and sources of debt financing.
A Democratic Congress might strengthen the stance to raise taxes especially amid criticism that recent tax cuts dented the fiscal deficit, created investment distortions, and raised income and wealth inequality. But the economic slowdown might limit or delay the administration’s ability to raise taxes. Moreover, there have been concerns about possible impact of these policies on U.S. competitiveness and impact on investment and small businesses.
Health Care Reform
In a country with around 47 million uninsured and the middle-class battling with rising health insurance premiums and job-immobile coverage, Obama will face an immense challenge to undertake the impending health care reform and ensure quality healthcare - that presently fails to match with even other developed countries. The President has endorsed a universal health insurance coverage which will have mandates only for children. The plan includes the creation of a regulated National Health Insurance Exchange where individual insurance can be purchased. Low and middle-income households will benefit of subsidized premiums. Firms that do not offer insurance to their employees will face a tax penalty. The improvement in the insurance coverage, in the next few years, might come with a high price tag.
Trade Policy
Regarding trade, Obama has pressed on including on labor and environmental standards in trade agreements. He has also proposed to raise duties on Chinese imports to offset the undervalued Yuan and dumping of goods and also take measures against their violation of intellectual property rights. Part of the plan also includes greater scrutiny of investments by Sovereign Wealth Funds.
Even as the global recession is increasing risk of slowdown in global trade and possible rise in protectionism, this might be exacerbated by a Democratic Congress that favors conditional trade agreements. The current financial crisis and rising significance of Sovereign Wealth Funds might also increase Congress’ aversion to financial globalization and inward foreign investment. But aversion to trade might be overrated as they realize the risk of unilaterally withdrawing from global trade.
While fair trade might be the way for survival ahead, U.S. insistence on non-tariff barriers to protect some sectors and jobs from import competition might isolate it from trade deals and possible gains from multilateral trade talks.
Labor and Middle-Class
However, the most important and significant challenge that Obama will face is alleviating the American middle-class woes due to the recession but also due to the impact of globalization on workers in the recent years. While the lower and middle-income groups have benefited from trade via cheaper imports, the net benefits from globalization are still being heavily debated.. In the most recent years, real wages have remained stagnant for the middle-class in spite of rising cost of living.
In this respect, Obama has offered to raise the minimum wage adjusted for inflation and introduce laws to make organizing unions easier. He has proposed to reform the Trade Adjustment Assistance, wage insurance and worker retraining programs.
Foreign Policy
While economic policy issues make take the fore and constrain foreign policy, many global leaders will be watching the new foreign policy team for clues of the new administration’s priorities. No shortage of challenges await – a resurgent Russia resenting NATO’s involvement in its near abroad, an Iran that remains dedicated to nuclear proliferation despite sanctions etc. Obama’s foreign policy vision has centered around multilateralism and revived diplomacy - something for which European allies have been longing - to further US interests at a time when the U.S. military is engaged in two wars. Iraq and Afghanistan will likely consume much of the administration’s focus - Obama has pledged to withdraw troops from Iraq within 16 months of taking office and counter resurgent Qaeda and Taliban forces in Afghanistan. Meanwhile, economic and not political ties may continue to define the U.S. relationship with key Asian economies, including China, its largest creditor.
But finding common ground with China, the second largest consumer and importer of oil, may be required to meet energy policy and anti-climate change goals. Obama has stressed conservation and use of alternative fuels to meet America’s energy needs in order to reduce US oil imports and its trade deficit. However, the lower price of oil and worsening economic outlook expenditures may reduce some of the political will around cap and trade policies as well as reducing pressure to begin offshore drilling.
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