President-Elect Barack Obama certainly has a strong political hand going into his inauguration on January 20. Not only did he secure an emphatic electoral college vote, and a six point lead in the popular vote, but the Democrats have secure majorities in both the House of Representatives and the Senate, as well as a majority of state governors. The opportunities for Obama to undertake his agenda, which has focused firmly on the idea of ‘Change’ from the Bush Presidency, are immense. Indeed, Obama has focused on plans in the fields of tax, trade and healthcare reform as well as plans to tackle climate change – all of which can be conservatively called ‘ambitious’.

Despite all of his advantages heading into his presidency, Obama faces a number of challenges to enacting his promised reforms:

• It’s the economy, Stupid: The social and tax reform elements of Obama’s package are, to some degree, going to have to play second fiddle to getting the US economy back on its feet. Sure, tax cuts for families and seniors will help to boost domestic demand, but will also be costly, especially when looked at against the backdrop of the mooted US$175bn stimulus package and US$700bn+ financial sector bailout. Indeed, the US$455bn deficit in FY2007-08 could more than double this year. A trillion dollar deficit, which looks all but unavoidable by 2010 on the back of a recession which will last at least three quarters, would hardly be a positive signal from a new Democrat administration.
• Healthcare is a mine field: Plans for a more comprehensive healthcare system in the US proposed by Obama are unlikely to be free from controversy. The last concerted effort by the Democrats in this area resulted in 1993 resulted in Obama’s one-time opponent Hillary Clinton suffering a major public setback. A lot of political courage is going to be needed to tackling vested interests and freeing up sufficient resources for the package to pass Congress.
• US image abroad: US soft power has taken a significant hit amid the ongoing problems in Iraq and Afghanistan, and Obama has benefited significantly from popular discontent with these wars both at home and abroad. He will enjoy a honeymoon period in dealing with these issues, but fostering enhanced security in both countries – and the Middle East in general – is going to require a lot of time and attention, which his administration may not be able to dedicate amid the economic problems at home. Indeed, easing anti-American sentiment across the world is not a simple task of pulling troops out of Iraq. Rather, the US needs to lead in ensuring that wealth is generated across the world to tackle the allure of extremism, and that moderate voices in hotspots continue to receive solid Western support.
• Protectionism is not the answer: Obama has spoken out strongly against the negative effects of parts of the NAFTA trade deal, and companies engaged in outsourcing. I find myself immediately suspicious of any efforts to move towards protectionism, and away from a freer trade agenda. Trying to keep jobs ‘on-shore’ will have a price: lower industrial productivity, higher costs for businesses, and the potential for retaliatory action by foreign (including emerging) states. The US needs to be a leader on free trade and the abolition of red tape and regulations, not a major protagonist.

As such, Obama does not have an easy task ahead of him. He will likely have a freer hand in domestic politics than many of his predecessors given the dominance of his own party, but the external constraints will mean that Obama will have to be quite a wily operator. He has shown his ability many a time on the campaign trail – doing so again and again in the West Wing will be vital to ensuring a successful presidency.