Obama Names Economic Recovery Advisory Board

As manufacturing reports show a drop in orders for durable goods, President-elect Barack Obama and his new Economic Recovery Advisory Board will have an uphill battle ahead of them.

Orders for durable goods dropped by 6.2% last month, more than double the 3% decline economists expected, the Department of Commerce reported today. Although the Labor Department reported that unemployment insurance claims have dropped unexpectedly to 3.96 million, down from the previous week’s 4.02 million (the highest level in 25 years), the slowdown in manufacturing has hit jobs hard.

Obama has been diligent in his promise to act swiftly and boldly on the nation’s economic problems. His assembling of a team of non-government affiliated advisors with a fresh perspective is how he plans to seek advice that is “candid and unsparing” in their assessment of his economic recovery plan.

“The reality is that sometimes policymaking in Washington can become too insular,” said Obama in today’s news conference. “Those who serve in Washington don’t always have a ground-level sense of which programs and policies are working for people, and which aren’t.”

The Economic Recovery Advisory Board will be modeled on the Foreign Intelligence Advisory Board

created by President Dwight D. Eisenhower to provide an independent voice on intelligence issues. The Board will be composed of distinguished individuals from diverse backgrounds outside of government —- from business, labor, academia, and other areas.

The first to step aboard Obama’s new team is former Federal Reserve Chairman Paul Volcker who will hopefully be able to provide insight on Obama’s plan to generate some 2.5 million jobs over the next two years. Volcker served as Fed chairman from 1979-1987 during Presidents Jimmy Carter and Ronald Reagan’s administrations, when inflation skyrocketed and unemployment rates were the highest they had been since the Great Depression. Last week, recessionary unemployment rates reached the levels from when Volcker was in office. He was a part of the team that helped the country recover from the steep recession of 1983 and may have some answers for Obama’s new economic team.

“At this defining moment for our nation, the old ways of thinking and acting just won’t do.  We are called to seek fresh thinking and bold new ideas from the leading minds across America,” Obama said . “And as we chart a course to economic recovery, we must ensure that our government — your government — is held accountable for delivering results.”

Along with Volcker, Obama also named University of Chicago economist and Obama policy adviser Austan Goolsbee to serve on the board today. Austan Goolsbee will serve as the panel’s staff director.

Volcker, Goolsbee and other board appointees will assist the new top notch team of economic advisors including, Timothy F. Geithner as Treasury Secretary and Lawrence Summers as director of the national economic council, who Obama announced earlier this week.

Obama continues to lay the ground work to reverse what he described as “an economic crisis of historic proportions.” Today’s press conference the third in as many days has been considered as Obama’s strategy to instill confidence in his administration amidst the country’s economic turmoil.

“He is laying down a program to create jobs,” says Darrell Williams, a member of the Black Enterprise Board of Economists and director of the LECG, a global expert services and consulting firm. “That is something that hasn’t received any attention up until this point. His plans to create jobs for ordinary working Americans will stabilize things. There is going to be a positive effect just from him exerting some leadership over these issues.”

Unfortunately, Obama’s plans to stimulate the economy will not be instantaneous. With rising deficits and a sinking economy his new economic team will face even more hurdles come January 21, the first day after the presidential inauguration. “What President- elect Obama is showing is that he has put together a great team, but that team is not going to be acting independent of his leadership.”

Gross Domestic Product slipped below last month’s anticipated rate of 0.3% to 0.5%. This is the worse showing since the third quarter of 2001.

Meanwhile, the Federal Deposit Insurance Corp. said yesterday that the list of banks it considers to be in trouble shot up nearly 50% to 171 during the third quarter – the highest level since late 1995.

Consumers are being hit just as hard as financial institutions, the report showed that Americans’ disposable income fell at an annual rate of 9.2% in the third quarter, the largest quarterly drop on record dating back to 1947.

Treasury Secretary Henry Paulson and the Federal Reserve rolled out two new programs Tuesday that would provide up to $800 billion in an effort to get more loans flowing in such critical areas as mortgage lending, credit cards, auto loans and small business loans. It is hoped that his actions will spur manufacturing and jobs.

The Standard & Poor’s/Case-Shiller U.S. National Home Price Index said that home prices tumbled a record 16.6% during the third quarter from the same period a year ago. Prices are at levels not seen since the first quarter of 2004.

“One of the main things that have to happen sooner rather than later is that policies have to be put into effect to stop the falling housing prices. The first step in doing that is to stem these foreclosures,” says Williams.

Obama’s leadership is even making an impact on the current administration. As an example, Williams made note of Paulson’s new $800 billion plan to help homeowners with the foreclosure situation; something that only a week before Paulson was against.

“I think it is reasonable to assume that Obama’s leadership had something to do with [his change in decision] and it is an indication of how strong his leadership is going to be going forward,” said Williams.