Obama Long on Plans, Short on Time

This post first appeared on Minyanville.

President-Elect Barack Obama has a little over 2 months to prepare for the hardest job in the world.

With the election now behind us, Obama must start shaping the policies he’s vowed to fight for. According to Bloomberg, he’s not likely to waste much time reveling in his victory.

The financial crisis is already being referred to in the past tense, but to keep it that way Obama will need to ensure swift implementation of the programs and initiatives the market is already pricing into its economic outlook.

In the near term, the $700 bailout will be integral in Obama’s efforts to right our financial ship. Recent initiatives from Bank of America (BAC) and JPMorgan (JPM) to step up loan modification efforts will likely be supplemented by more government-sponsored homeowner support. The relief plan, championed by FDIC Chairman Sheila Bair, will likely go into effect before Obama is sworn in, although negotiations have stalled in recent days as bureaucrats squabble over details.

Earlier this year, economic stimulus checks buoyed stocks, as retailers like Target (TGT) and Sears (SHLD) collected the government dollars burning a hole in American pockets: Stores offered incentives for consumers to turn their temporary wealth into gift certificates. Expect more of the same if and when a second round of checks go out. But with Target and Sears down 30% and 40%, respectively, since the checks were sent in May, free money is clearly no panacea for struggling consumers or floundering retailers.

Tax issues were central to the long campaign, and Obama’s aggressive plans to take on “Wall Street fat cats” will quickly become a reality. If he succeeds in this aim, tax revenues could slump, as wealthy Americans ferret out new loopholes to keep the government's paws off their bulging coffers.

Investors will also be watching closely to see if capital-gains taxes move higher, as Obama has promised they will.

With public debt costs on the rise, Obama will need to figure out how to pay for the extensive new programs he's proposed. Many argue it’s easy: Getting out of Iraq will free up billions in federal dollars. But it’s not quite that simple. Iraq has been paid for with borrowed money: Witness our more than $10 trillion in debt. Balancing the budget and reducing our dependence on the savings of the developing world will require less government spending, not more.

Energy independence took center stage this summer, as candidates fought to win the votes of American commuters who watched gas prices shoot to record highs. Fuel prices have eased of late, but the long term implications -- both economically and from a national-security standpoint -- of our dependence on foreign oil have not diminished.

Ultimately, Obama must take a long list of priorities and narrow it down to the few he can focus on in the near term for maximum impact. As one political analyst told Bloomberg, “Ronald Reagan could list on the fingers of one hand exactly the things he wanted to do on January 20, 1981.”

The financial system and economy are still wobbly, credit markets remain largely frozen, and consumers are increasingly shunning excessive spending habits of the past.

Change, the old adage goes, is good - but Obama certainly has his work cut out for him.