Obama, Obama, Obama...

Welcome back to Two Dollar Bill. Today, the National Bureau of Economic Research officially confirmed that the U.S. economy is in a recession that began in December 2007. So, now that the obvious has been declared, how will the Obama administration respond when Barack Obama takes his seat behind the Resolute desk on January 20th?

While the Obama administration will certainly make waves, there are mounting indications that it may (grudgingly) adopt moderate fiscal and taxation policies. President-Elect Obama will appoint Timothy Geithner, a Wall Street favorite and the current president of the Federal Reserve Bank of New York, to Secretary of the Treasury. Additionally, there is credible speculation that rather than immediately increasing marginal income tax rates and repealing the Bush tax cuts, the Obama administration may employ a "wait-and-see" strategy: allowing the Bush tax cut legislation to expire on schedule (January 1, 2011) before considering further income tax reform. These developments are more likely a result of the recession forcing President-Elect Obama's hand than a political change of heart. Of course, there could always be something else at play.

While I was enjoying the holiday, I caught one of my favorite movies on television: Ferris Bueller's Day Off. My favorite scene portrays Ben Stein as a high school economics professor. The scene provides a timely, albeit comical, reminder of the dangers of economic protectionism (Smoot-Hawley Tariff Act) and excessive taxation (Laffer curve). Maybe President-Elect Obama has watched the movie recently as well...