Accelerate, Then Hit the Brakes; But Watch Out for the Curves!

Obama's economic team is going to have to be very agile in the months and years ahead, according to a Wall Street Journal column yesterday by Marina Whitman. First, the focus needs to be on avoiding deflation; then on containing inflation. First, to prevent a near-total freeze in private lending, we need to bail out financial institutions; later we'll need to sell off the assets the bailouts bought up! First, consumers have to be enticed to increase spending; later, to restore long-term growth, Americans will have to increase their personal savings rate. First, we will have added $1.5 trillion to the government deficit; later, Obama will have to tackle entitlement reform and budget deficits. First, we need to maintain low interest rates by financing federal spending with foreign money; later, we'll have to lesson our reliance on financing from China, Saudi Arabia, and other countries.

Obama and his team will have to have "impeccable timing" in first accelerating, then hitting the brakes. Ms Whitman, who was an advisor to President Nixon, warns that there will be many curves in the road that will "put the new administration to the test."