After five trading days in which investors seemed optimistic about the incoming Obama administration, reality came crashing down yesterday as the private group of economists charged with defining the nation’s business cycles declared that the economy has been in a recession for a year. Coupled with fresh grim economic data, the news sent investors into a panic. The Dow Jones industrial average plunged 7.7 percent and the Standard & Poor’s 500 index dropped 8.9 percent. In declaring that the nation has been in a recession since December 2007, “the National Bureau of Economic Research confirmed what many Americans had already been feeling in their bones,” notes the New York Times. The Washington Postpoints out that the announcement came at a time when the recession appears to be getting worse, and the Los Angeles Timeshighlights that many think the downturn could continue until well into 2010, if not longer. The Wall Street Journalpoints out that if it lasts past April, it would be the longest recession since the Great Depression.
USA Todayleads with President-elect Barack Obama officially unveiling his national-security team, which he said would deliver “a new dawn of American leadership.” Obama recognized that some who were on the stage with him, including Sen. Hillary Clinton and Defense Secretary Robert Gates, had disagreed with him in the past but made it clear that was part of the reason they were chosen. “I’m a strong believer in strong personalities and strong opinions,” Obama said. “I’m going to be welcoming a vigorous debate inside the White House.” Many foreign-policy experts believe Obama’s team “will differ more in style than substance,” as USAT puts it, from the more moderate team that served in President Bush’s second term.
The news that the economy is in a recession wasn’t particularly surprising, since most economists had already agreed that it was under way and debated only when it had began. By setting December 2007 as the beginning of the downturn, the group of economists that make up the National Bureau of Economic Research focused on employment data to make their call. But the official declaration of a recession was hardly the only bad news to greet investors Monday. An index of U.S. manufacturing activity dropped to its lowest level since 1982, and a separate report revealed that construction spending suffered a higher-than-expected 1.2 percent plunge in October. The WSJ points out that the November employment report that will be released Friday is expected to show that nonfarm payrolls decreased by more than 300,000. As has been the trend when faced with bad economic news, investors flocked to U.S. Treasury bonds. The pain spread to other parts of the world today as stock markets throughout Asia dropped sharply.
If investors were hoping for encouraging words from the nation’s economic leaders, they were surely disappointed. Federal Reserve Chairman Ben Bernanke warned yesterday that “even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time” and Treasury Secretary Henry Paulson cautioned that “the journey ahead will continue to be a difficult one.” Still, Bernanke vowed to do everything at his disposal to try to improve the situation.
The Fed chairman declared it is “certainly feasible” that we’ll see more cuts in short-term interest rates, even as he recognized they can’t go much lower. The Fed’s benchmark rate is already at 1 percent, and many are concerned that if the central bank goes much lower it “would be out of recession-fighting ammunition,” as the WSJ says. In what the NYT calls “an unusually explicit follow-up,” Bernanke emphasized other steps the Fed could take to try to prop up the economy by expanding its involvement in the private markets. Bernanke mentioned that the Fed could purchase Treasury notes and bonds in an attempt to bring down long-term interest rates. Meanwhile, Treasury Secretary Henry Paulson made clear that his office is working to develop new programs that will aim to get credit flowing again.
Early morning stories report that a Thai court has dissolved Thailand’s top three ruling parties for electoral fraud and ruled that the country’s prime minister must step down. The ruling could end the protests that have paralyzed the country and stranded thousands of travelers but might also lead to clashes between government supports and the protesters who have been blockading Bangkok’s two airports.
Obama’s unveiling of his national security team held no surprises: Sen. Hillary Clinton is secretary of state; Defense Secretary Robert Gates will stay on in his job; retired Marine Gen. James Jones is national security adviser; Eric Holder was nominated as attorney general; Arizona Gov. Janet Napolitano will be head of homeland security, and Susan Rice will be U.S. ambassador to the United Nations. Everyone except Gates and Jones will need to be confirmed by the Senate.
The appointee who is likely to face the most contentious confirmation hearings is Holder. In a front-page profile, USAT highlights that Holder is the first African-American nominee for attorney general, and civil liberties advocates are excited about the possibility that the Justice Department could be led by someone who has spoken up in the past about racial disparities in the criminal justice system. But many Republicans have said they’re not impressed with the Holder pick, primarily because of his role in President Clinton’s pardon of Marc Rich. The NYT refreshes readers’ memories by taking a detailed look at the events that led to the pardon and declares that Holder “was more deeply involved in the Rich pardon than his supporters acknowledge.” Holder not only had repeated contact with Rich’s lawyers, but his assessment that he was “neutral, leaning toward” favorable on the pardon was a key factor in Clinton’s decision to approve it, even though some of his senior staff vehemently objected.
The WP’s Richard Cohen declares that the Rich pardon should disqualify Holder for the job. While it might be true that everyone is entitled to a mistake, the Rich pardon suggests that Holder “could not say no to power,” which, as the Bush administration has shown, is a critical requirement for an attorney general. “Holder was involved, passively or not, in just the sort of inside-the-Beltway influence peddling that Barack Obama was elected to end,” writes Cohen. “Maybe he deserves an administration job, just not the one he’s getting.”
Much of the attention yesterday was focused on Clinton, whose judgment and foreign-policy credentials Obama questioned during the primaries. When asked about these previous statements, Obama pretty much said Americans shouldn’t take too seriously what is said during “the heat of the campaign,” and he “shrugged off the discordant notes with a smile,” the NYT puts it. Want a walk down memory lane? The WP’s Dana Milbank republishes some of the juiciest quotes. The NYT makes clear that standing side-by-side with Clinton wasn’t the only example of how Obama aimed to display that he’s no longer campaigning and is now focused on governing. Notably, his pledge to withdraw combat troops from Iraq within 16 months was much less forceful than it was during the campaign.
Regardless of what happened in the past, the key question in the months ahead will be whether Obama and Clinton can develop a strong relationship that will allow her to serve effectively, points out the Post in a front-page piece. In conversations before the appointment was made official, Clinton was apparently reassured that she’d be able to pick her own team and would have as much access to Obama as she needs. Obama’s team did make it clear that they want her to place James Steinberg as her deputy “but that hardly seems a problem,” declares the Post since Steinberg developed a good relationship with her husband as his deputy national security adviser. Interestingly enough, Steinberg recently co-authored a book that questioned the wisdom of appointing high-profile figures who don’t have a strong connection to the president in important national security jobs.
The LAT says the Bush administration is getting ready to unveil a new “right of conscience” rule that would allow health care workers to refuse to participate in any way in procedures they find objectionable, including abortion and possibly even birth control or artificial insemination. Doctors and nurses have long been permitted to refuse to perform abortions, but under the new rule health care workers could also refuse to provide information on the procedure. Although the Obama administration could reverse the rule, it would take months. Alternatively, Congress could move to reject it, something that a few Democratic lawmakers have said they plan to pursue.
The LAT’s automotive critic writes an op-ed piece saying that Congress should forget about bailing out Detroit’s Big Three and simply suck it up and buy General Motors. “I say, let’s avoid the euphemisms and have the courage of our supercharged Keynesian convictions,” writes Dan Neil. The move would not only ensure the industry’s survival but it could also put the United States at the forefront of innovation in building new green vehicles.
USAT notes that one calculus teacher has come up with an ingenious way to pay for the photocopying of his tests after his suburban San Diego high school slashed the budget: Selling ads. Tom Farber charges $10 for a quiz, $20 for a chapter test, and $30 for a semester final. When his plan was publicized in local media, he garnered lots of interest and has raised $350 so far. Despite worries about corporate influce, the truth is that most of the ads are inspirational messages paid by parents, but there are some from local businesses, including from a dentist who has a message for students: “Brace Yourself for a Great Semester!”