Wall Street reacts dramatically to historic election result

Wall Street reacts dramatically to historic election result




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The crowds cheer, the flags flutter, a new dawn is upon us – congratulations on the election victory, Barack Obama – now let’s get back down to business. 

Following his spectacular win yesterday, Wall Street pushed the Standard & Poor’s 500 back above 1,000 for the first time in 3 weeks. However, the hard part hasn’t even begun yet. As Mr Obama himself has said: "Even as we celebrate tonight we know that the challenges tomorrow will bring are the greatest of our lifetime: two wars, a planet in peril, the worst financial crisis in a century."
 
Lest he forget, Mr Obama has just taken on the colossal task of rescuing America and the world from the grips of economic crisis. With a financial system resembling a smoking train wreck, a meltdown in the housing market and general bank bedlam, there will be a very long to-do list sitting on the next President-elect’s desk.
 
“This is the toughest transition faced by any president since [Abraham] Lincoln. There is very little wiggle room,” commented Paul Light, a professor at New York’s Wagner School of Public Service.
 
Time is ticking for Barack Obama, with just 77 days to assemble his Cabinet, form a government, prepare his policy agenda and rework the US budget before officially coming into office on the 20th of January 2009.
 
No doubt steering his way out of the economic downturn will dominate Mr Obama’s plans. The concept of acting quickly seems to be drummed into his head, with the rumours arising of him using Democrats’ control of Congress to usher in new legislative initiatives even before he’s sworn in. There have also been whispers of him calling lawmakers to Washington in order to pass a new emergency economic stimulus package worth $175 billion.
 
The economic policy that Barack Obama outlined during his election campaign is certainly ambitious. He aims to revamp Wall Street regulations, lower the cost of health care and bring a tax cut to 95% of Americans.
 
He has also talked of providing fiscal stimulus for the economy, including $25 billion grants for state and local governments; $25 billion for infrastructure jobs, unemployment insurance and rebate cheques; along with aid for auto industry and tax credits for firms that create jobs in the next two years.
 
But all of these proposals will cost dearly. Mr Obama happens to be the unlucky President-elect who will inherit a budget deficit running into hundreds of billions a year and a national debt set to reach over $11 trillion. Such economic sacrifice will seriously restrict his wiggle room.
 
While the McCain camp criticised Mr Obama’s plans as a “return to a tax-and-spend approach,” other economists have expressed doubts too. “These are not things that are achievable,” Jeffrey Frankel, an economist at Harvard’s Kennedy School of Government, stated bluntly. Speaking of his policies, Mr Frankel said: “Energy independence is basically not achievable. Balancing the budget is not achievable. Preventing us from going into a recession? It's too late."   
 
In times as tough as these it’s fortunate that Barack Obama takes office with so much goodwill behind him. America, and the world, is willing him to succeed. And whilst nearly everyone predicts years of hardship and sacrifice ahead, a vote for the Democrats was a vote for change – if anybody can face the challenge of curing the economic downfall, it will be Barack Obama.
 
In his own words: “The road ahead will be long. We may not get there in one year, or even one term but America, I have never been more hopeful than I am tonight that we will get there.”  

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