Obama’s Restructuring Plan

A man with motivational speeches, carrying a strong conviction that he has the vision of all that America needs and that he would bring to life all that the past governments have been incapable of doing.  President Obama says that he is more than shallow promises and says that ‘change is what he believes, he can’ is the right of Americans and they shall have it. He says that in times of ‘unusual situations’ he is doing the unusual to baptize the US economy.

With a lot of hope and belief the people of United States of America extend their support for Obama. There were several issues that the government was to address in times of serious crisis. There was a large fiscal deficit to address, one of the most matured financial markets was sagging and the liquidity crunch led to the slow down of growth, the big bulls of the finance market –likes of Lehman Brothers, Washington Mutuals, Bears Sterns collapsed like a house of cards, others had fractured their spinal cord and were looking for bail out support for revival. The sub-prime crisis had washed away the remaining confidence of the people that the economy was soon to see revival, and it had become official that United States of America was in the recessionary phase, a phase that was to stay.

With such challenges to take up the Obama administration jumped headlong to delve with all these issues. Obama’s agenda during the campaign hit the nail right, the key areas of focus was a) higher employment levels by creating jobs in America, b) Immediate relief for struggling families, c) assistance to the homeowners and lastly to salvage the economy from the ongoing crisis. More than 7.5 lakh jobs were lost in the year 2008. People started parking their funds in gold or kept them locked in their cupboards rather than making investments. The basics of macro economy would not work if the money supply went any haywire. So to keep the consumer spending alive, it was important that jobs remained intact and employment levels increased. This is where from the ‘buy American’ drive began. Next on the agenda of ‘change’ was relief to the struggling families. A lot of thinking had been done on this front and several tax exemptions and remedies were provided. The Housing market would make rigorous efforts in collaboration with the mortgage industry to revive the markets there is still no progress seen on this front. The treasury would regulate the interest rates and the refinancing industry was sure to act like a catalysts. North American Free Trade Agreement was to be amended, outsourcing of jobs to be reconsidered so that the companies cannot escape the tax burden simply by outsourcing and reducing job prospects in America. Next and the most important on agenda were using ‘tools and means’ to revive the economy.

Now that more than 100 days of Obama administration are over and people are all over, meticulously analyzing every move that he has made so far, there are people questioning whether the reforms implemented are doing any good to America or is Obama and his team creating a bigger mess of an already messy situation.

Obama’s $800 billion stimulus package, now a law, would add $400 billion to the fiscal deficit and bring it to 10% of the GDP levels which are currently at 8.3% of the GDP. The benchmark Federal fund rates are at zero. Money supply in the market has been increased by 20% in the three months of his administration. The Congressional budget office has announced a fiscal deficit of $1.19 trillion which is 8.3% of the GDP. The unemployment levels are on an all time high. Revision in the financial markets regulations have been eyed; making them more transparent and pro-investors and looking for the systemic risk approach to ensure that no company’s risk appetite would cause the economic downturn.

What does the layman understand of all these policies? Is America on its way to recovery or are they digging a bigger pit for themselves. A lot of analysts have been calling names and ridiculing every move that Obama is making. From outsourcing policies, to health and environment issues, shedding billions of dollars in bailout or increasing the burden on the government or investment in clean energy and technology, because people love to take potshots at others.

An economy is not driven by a particular factor but several factors – significant, insignificant, big or small and affects everything. So there is a Herculean task. A policy is not bad unless the shortcomings start to show. So to understand the economies of recovery we will have to wait for a while because what took eight years to destruct can’t be rebuilt in only 100 days.