Obama's Economic Team Facing Huge Expectations

By Albert Bozzo
|  Monday, Nov 24, 2008  |  Updated 12:56 PM PDT
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Obama's Economic Team Facing Huge Expectations

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When President-elect Barack Obama trots out his economic team Monday, they'll have to walk a fine line between saying too much and saying too little, analysts say.

Given the usually high expectations and what some consider a lack of leadership amid a financial crisis and economic downturn, the Obama team has to project competence, confidence and commitment to swift, decisive action when it assumes office.

At the same time, Obama and his nominees for cabinet positions and key White House advisory roles can't reveal too many specific details about such things as an economic stimulus package, tax policy and government efforts to prop up the financial system.

  • Click here to watch Obama news conference.

"I don't think you do anything with details, but you reassure people that you're making plans and that—when you get into office—things are going to happen very fast," says Robert Brusca, chief economist of Fact & Opinion Economics. "You talk mostly talk about having a strong team that has good credentials and is knowledgeable about the situation."

There's been general approval of the Obama economic team, which includes New York Federal Reserve President Timothy Geithner for Treasury Secretary, former Treasury Secretary Lawrence Summers as head of the National Economic Council, two-time Clinton Administration cabinet member Bill Richardson as Commerce Secretary. (Christina Romer, a professor at the University of California, Berkeley, was named to head the Council of Economic Advisors.)

The members of the Obama economic team—all Washington veterans—are unlikely to be drawn into debates about key policy issues, even at a time of enormous uncertainty, which some say was compounded by Obama's delay in naming his nominees.

"The market was hungry," says Greg Valliere, chief strategist at Stanford Washington Research Group. "People, the markets, needed to hear from him. He'd been so invisible."

Valliere says the markets are looking to learn two key things: Whether Obama will quickly seek to repeal Bush administration tax cuts on the wealthy and the size and specifics of what's already thought to be a large fiscal stimulus plan.

  • Click here to watch Valliere interview

"They might day something about mortgage renegotiation," says former White House economist and regulator Lawrence White, now a professor at NYU's Stern School of Business. "Something that supports [FDIC chairperson Sheila] Bair, who had been mentioned as a candidate for the top Treasury post.

Top Advisor Sets The Table

Austan Goolsbee, a top economic advisor during the campaign, told CNBC that Obama was "announcing an all-star team for economic recovery."

  • Click here to watch Goolsbee interview

He added that the the "front burner issue is economic recovery," and that the administration would deal with that immediately upon taking power. "You have to come in with a bang," he said.

 

Goolsbee would not be pinned down on the size and scope of the fiscal stimulus package—thought by some to be around $700 billion—but acknowledged it would be bigger than the $175 billion that Obama proposed during the presidential campaign.

"Its not a numbers-based economic package," he said.

"Summers will be the power behind the throne on the economy in terms of the magnitude of stimulus and Summers is talking about a really big number," says Valliere.

"Its too early to get too specific," adds James Awad, managing director at Zephyr Management. "The only thing he can do is talk big stimulus and say no tax increases."

Since word of his cabinet nominees leaked out last Friday, there's been growing speculation that Obama might not immediately follow through on a campaign pledge to eliminate tax cuts on wealthy Americans as well as capital gains and stock dividends and instead simply let them expire, per the current law, in 2010.

Goolsbee, again, was careful in discussing that issue, telling CNBC the emphasis on tax policy changes is "clear" and "geared on easing the squeeze" on those (couples) making less than $250,000.

 

When pressed on tax specifics, Goolsbee said the immediate emphasis would be on "how to install the economic package," citing such things as major tax cuts, spending on schools and green jobs. "Everything else we'll have to deal with later," he said, implying that tax hikes would not happen right away.

A delay in an repealing the so-called Bush tax cuts would be most welcome on Wall Street, analysts say, and "really positive for the market," says Valliere.

Veteran Awad is among them.

"What they want to start to do is turn the tide of confidence," he says. "What Obama doesn't want to do is walk into a situation that is so bad that there's nothing he can do."

Former Senate Banking Committee chairman Donald Riegle Jr. adds Obama should consider another working meeting with Pres. Bush to discuss incremental steps before the change in power Jan. 20. "This is a dangerous gap in time - that needs to be more wisely managed."

For more stories from CNBC, go to cnbc.com.

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