The impact of the Barack Obama presidency on the global economy was a consistent theme of several speakers at last week’s Fidelity Cayman Business Outlook conference at The Ritz-Carlton, Grand Cayman.
Although most of the speakers believed the US recession would continue quite a while longer before a recovery began, they spoke about the role the newly sworn-in American president and his administration will play in the global economy.
Congressional scholar Thomas Mann said the American public did not have a lot of confidence the economists know how to get the US out of the financial mess.
‘Politics, at times, trumps economics,’ he said. ‘There is now a ray of hope coming from the political arena, not from the economists.’
However, Mann warned that President Obama faces a difficult challenge.
‘As excited and exuberant as the country is over Obama’s presidency… he confronts an extraordinary set of problems,’ he said, calling the
problems ‘as daunting as any president has every faced.’
Mann spoke about what the new president will focus on in the first 100 days of his administration.
‘Obama’s first task on the economic agenda is financial stabilisation,’ said Mr. Mann. ‘He also has to find a way to stimulate the economy and do it in a way that the length of the recession and the social and economic costs will be minimised.’
Mann said the backdrop of the financial crisis in the US was a dysfunctional political system that featured a deep ideological polarisation of the Democrats and Republicans.
‘Simple-minded political truths have gotten in the way of classic American problem solving,’ he said.
Even though it is the early days into the new presidency, Mann noted that Obama’s senior appointments reflect both parties in the new administration, indicating a consensus approach rather than a conventional Democratic ideology.
‘Obama disdains ideology,’ Mann said. ‘He believes in talking to people with whom he disagrees.’
Mann noted that President Obama had already reached over across the party aisle to Republican senator John McCain after a testy campaign and that a pragmatic approach could galvanise political and public support.
‘This is a man who will embrace his adversaries,’ he said, pointing out that Obama told Democratic senators not to punish independent Senator Joe Lieberman for backing John McCain in his bid for the presidency.
‘He basically said ‘Don’t punish him; embrace him. We don’t need more enemies; we need more friends’. And I can see a very productive relationship [with Lieberman] as a result.’
Returning to the first 100 days of the presidency, Mann said it was important that Obama not over tax during the period, but to show that the promises made were being kept.
He noted that the world needed the promise and high expectations of an Obama presidency as much as the US needed it.
‘I’m upbeat that the political system has a chance to lead us out of this mess rather than producing it,’ he concluded.
Conference speaker Todd Buchholz, a former director of economic policy at the White House, also talked about Mr. Obama.
‘He will have no problem with the Republicans because they are in the minority so they are impotent,’ he said. ‘Where he will have problems is with the Democratic party trying to rewrite everything he submits.
‘It will take courage to take on these issues if he goes against the Democratic Party’s ideology.’
Economist Barry Ritholtz, responding to a question from the audience, spoke about Obama’s likely approach to the financial services industry in this country, considering his speeches on anti-Cayman Islands and anti-tax haven during his presidential campaign.
He said that even though the US cannot legally regulate a sovereign nation such as the Cayman Islands, it has a strong influence over countries that want to do business with the US.
Consequently, it would be better if the Cayman Islands took a proactive approach with increased transparency and voluntary reporting.
‘History shows that self-regulation is less stringent and less punitive than if it comes from on high,’ said Mr. Ritholtz.