The Romer Aftermath

The recent departure of Christina Romer signals a troubling future for the Obama Administration's economic policy team -- and does not bode well for the president's party before the crucial midterm elections this November as the American public grows weary with the nation's slow economic recovery.

After his election, the president was criticized for his selection of Washington has-been and politically connected Larry Summers and New York Fed boss Tim Geithner as his main economic policy henchmen. But he balanced these appointments with solid choices in Peter Orszag, former head of the non-partisan Congressional Budget Office, to head up the president's budget office (OMB), and Romer, an academic economist respected for her expertise on recessions, to run the Council of Economic Advisers (CEA). Obama also tapped former Federal Reserve Chairman Paul Volcker as an adviser, though Volcker's role in economic decision-making is not quite as clear or concrete. Orszag and Romer are now gone, both for different reasons.

Though Romer has denied it, it appears the CEA's role in economic policy advising was largely minimized with the presence of Summers, whose position , created ad hoc, seems to conflict the responsibilities of other officials such as Romer, whose role as chief economic adviser to the president was clearly defined.

Despite his many policy successes, President Obama has still yet to send clear signals to the markets as to what his economic policies mean for the American economy, as well as who is informing his policy-making. With Romer's departure, it has become more clear that certain heavyweights such as Summers are pulling more strings, while other advisers may be cut out of the process.

The Peg is Dead

China's controversial currency policy may finally be headed to the gallows, but what remains unclear is how this will affect and prompt movement on numerous politically sensitive issues in the United States, namely its large twin deficits, the current account and government primary deficit.

Make no mistake: China's move is largely motivated by domestic factors - the need to allow inflation to finally creep into its possibly overheating economy and re-balancing its export-based economy with a decidedly smaller dependence on other economies - but, certainly, it was also under pressure to allow the yuan to appreciate by external players.

But for this move to re-balance global economic flows, the United States will have to do its part in the medium to long term. That is, to reduce its deficits and minimize its dependence on foreign creditors to finance those deficits by cutting spending and boosting national saving. Some of this could be accomplished by the hoped-for re-balancing in the current account. But currency values alone do not dictate trade, and therefore current account, balances. The United States needs to go back to being a center of innovation in manufacturing for a real re-balancing to be meaningful. And, with the current crisis in the eurozone, there is even one view that the revaluation could actually backfire.

The Obama Administration and his Treasury have achieved a victory long-sought by the president's predecessor. But now that China has been tamed on the currency issue, the ball is in the American court to do what is necessary to allow the full economic results of a yuan appreciation to benefit those constituencies who yearned for it.

Export Opportunism - Part II

An update on President Obama's pledge to increase American exports - the president today made reference to the country's trade relationship with China, providing further evidence that the administration could take the route of pressuring China on the currency devaluation issue to address its trade imbalance, a move that the Chinese government will likely be less-than-thrilled about:

http://online.wsj.com/article/SB10001424052748704259304575043171767767724.html

Exit Poll

There's something about crossing the River Thames at sunrise on November 5, 2008.

It is not the view of the east, where an ailing, once-venerable financial district that controlled the world's affairs for two centuries sits, awaiting the storms of the current times to pass.

Or to the west, the seat of Parliament, where MPs and PMs have tried to re-tool a fragile economic and political system, awaiting the emergence of someone on America's shores to take leadership in solving a crisis that was largely America's doing.

But something in the rising sun on the horizon of a country foreign to my own, the morning after an important election, makes me so proud to be from the United States of America.

Senator and President-elect Barack Obama has a lot to do to prove to the United States that his pledges for "hope" and "change" can be followed through with. But his resounding victory is a signal that the great nation of the U.S. has come to its senses.

Sen. Obama's speech, with figures such as Jesse Jackson - who laughed and cried with the great Martin Luther King Jr. and Robert F. Kennedy - letting the tears flow, was an inspiring spectacle. It makes me not only speculate, but know, that my 4-year-old niece, and her children, will understand the truly global world that we have come to experience, and will see it possible to run for office and make a change if she is inspired to do so. And it will be so not because she may be a Democrat or Independent or Republican, but because she is American.

Still, there were the panes of bullet-proof glass shielding President Obama in Chicago's Grant Park from the realities he will encounter over the next four, perhaps eight, years. He will face white supremacists, a weakened but nonetheless fierce Republican opposition and a skeptical right-leaning segment of the populace. On Day One in office, January 21, 2009, the Obama dream campaign will necessarily transition to painful reality - when Sen. Obama must address the immediate concerns of two costly wars in western and central Asia and a financial crisis that has already affected the world in ways unprecedented.

The achievements of Obama's opponent, Sen. John McCain, must not go unnoticed. In fact, Sen. Obama's gift of oratory was often matched by that of Sen. McCain -- and it was no more apparent during the campaign than during Sen. McCain's classy, respectful concession speech from the Biltmore Hotel in Phoenix.

I have a very dear friend in the U.S. Army, who is a centrist Republican and McCain supporter. And for his sake, I do feel some sadness that Sen. McCain, a man whom I also rooted for in 2000, seems to have reached his pinnacle and political destiny, without reaching the office he so deserved -- primarily because he emerged when an even more formidable electoral force emerged in the campaign of Sen. Obama. And Sen. McCain picked a horribly inept running mate.

John McCain was truly a maverick, a voice of reason for a party that had increasingly catered to the whims of a far-right religious coalition and a war-frenetic military-industrial complex that exploited the U.S. Constitution to expand executive and extra-judiciary power under President George W. Bush. Sen. McCain was a true patriot, one of the few public servants who could stand in front of a crowd and provide cold, hard evidence that he is a "maverick" worthy of such a distinction. He braved the cruelty of war for several years, and those of us like myself who complain about cold weather or untimely subway trains can learn a thing or two from a man who suffered in prison camps and came out a strong survivor. John McCain is just as deserving of the presidency as any other public servant, and is as intellectually and politically astute as any politician. He was never given much credit for that, and I think such credit is due.

For that, I can express my hopefulness not only in Sen. Obama's victory, but the fact that a man like Sen. John McCain was finally able to get his due shot at the U.S. presidency. It reflects America's return to common-sense and dignified politics, even if it got nasty toward the end, as it always does. America's best made it to the top, and had a fair chance to win over the American public's imagination. At the age of 72, Sen. McCain likely will never run for president again. But he, like Sen. Obama, will continue to inspire myself and millions of others to fight for what is true and just.

President Obama, let's get to work. There is much to be done, and the whole world, including the great city on The Thames, is watching and waiting.

"Vote for Me" Brought to you by...

Sen. Barack Obama will soon deliver a 30-minute address on television - it's technically an advertisement ($150 million in new campaign money can buy a heck of a lot), but it is clearly Obama's last big campaign push before the election (FINALLY).

Notwithstanding your political views, do you think this is ethical? Should John McCain be given a similar opportunity to provide his own life story and offer his own campaign message, uninterrupted for one half hour?

http://www.thrfeed.com/2008/10/obama-ad-may-ha.html

My pro-1st Amendment stance tells me it should be OK, but at the same time, Obama will likely reach a broad collction of voters/TV viewers with this ad. Should McCain have the same opportunity even though he lacks the cash?