Barack Obama’s holiday is over, the countdown to his inauguration has begun and the smoothest presidential transition in recent history is hitting some bumps in the road.

Yesterday, hours before the President-elect arrived in Washington for a final fortnight of preparations before taking office, his choice as commerce secretary announced abruptly that he was withdrawing before facing tough questions about business dealings in Senate confirmation hearings.

Bill Richardson, the New Mexico Governor, said that a pending investigation into a company that had contracts with his state “would have forced an untenable delay in the confirmation process”, — even though he insisted that had done nothing wrong.

Mr Obama accepted the decision by Mr Richardson, a former rival for the Democratic nomination and the most prominent Hispanic politician in America, with “deep regret”.

Last month a federal grand jury was reported to be investigating how a company that had already threatened to cause in Alabama one of the biggest municipal bankruptcies ever had been paid $1.5 million (£1 million) for similar work in New Mexico. It The investigation is said to be examining donations of $100,000 from the California-based CDR Financial Products to Mr Richardson’s efforts to register voters and pay for expenses at the Democratic National Convention in 2004.

Mr Obama’s handling of the transfer of power has been admired widely, with polls showing that more than four fifths of American voters approve of their new president. Even before he takes office, however, events ranging from a burgeoning economic crisis to Israel’s invasion of Gaza — and including the embarrassing sideshow over filling his former seat in the Senate — threaten to throw him off course.

He is expected to begin talks today with congressional leaders about a proposed economic stimulus package costing at least $775 billion, which is designed to create three million jobs. In a weekend video address, Mr Obama urged politicians to back his American Recovery and Reinvestment Plan. “If we don’t act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment and the American Dream slipping farther and farther out of reach,” he said.

However, Mitch McConnell, the Republican leader in the Senate, indicated yesterday that he would oppose any effort to rush the package through Congress so that it was ready for Mr Obama to sign on January 20. “I’m worried about the haste with which this may be done,” he said.

Although many states are desperate for an immediate infusion of federal cash to fund unemployment benefits and fill rapidly expanding holes in their budgets for key public services, Mr McConnell suggested they should receive loans rather than grants.

The plan also proposes spending vast sums on so-called shovel-ready public works construction programmes on roads, schools and bridges. Some economists and Capitol Hill staff, however, have suggested that the incoming administration is struggling to find enough projects that will actually create jobs and not be easily branded as special-interest funding.

Fiscally conservative Democrats want controls designed to limit the long-term growth of social security, Medicare and Medicaid programmes, which are sending projections for federal deficits spiralling into the trillions.

Mr Obama’s team members remain confident that they can overcome such hurdles. Rahm Emanuel, the incoming White House chief of staff, told The Washington Post: “You never let a crisis go to waste. People sense that we’re at a different moment in time and that you have to put aside preconceived notions and partisanship to solve problems.” For instance, the introduction of universal healthcare — long opposed by free-market Republicans — is being touted as a measure to help to rekindle economic growth and reduce costs on business.

Early steps in this direction, such as an expansion of children’s health insurance and a federal programme to computerise all medical records, are due to be made in the coming months.

Mr Obama’s detailed and hands-on approach to the crisis at home is in stark contrast to his silence on events abroad, which he has largely left to President Bush’s Administration. While remaining in daily contact with his national security team, he has avoided taking a stance on the conflict between Israel and Hamas.

His reluctance to speak out is being criticised in many Arab countries, where hopes had briefly risen that Mr Obama’s election might signal a shift in America’s unflinching support for Israel. The President-elect, however, has been keen to assure the influential Jewish lobby in the US that he is a committed supporter of Israel.

Ehud Barak, the Israeli Defence Minister, has made much of Mr Obama’s comments during a visit to Sderot, the Israeli town close to Gaza, that “if rockets were being fired at his home while his two daughters were sleeping, he would do everything he could to prevent it”.

Mr Obama’s arrival in Washington this week may yet be overshadowed by the latest chapter in the saga over his vacant Senate seat. Rod Blagojevich, the Illinois Governor, who faces corruption charges after allegedly talking about selling the seat to the highest bidder, has sought to pre-empt impeachment proceedings by appointing Roland Burris to the vacancy.

Senate Democrats have vowed to stop Mr Burris taking his seat in the Senate tomorrow on the ground that any appointment named by Mr Blagojevich must be treated as suspect. But Mr Burris, who would be the only African-American in the US Senate, has received strong support from black leaders, complaining that opposition to him is racially tinged.

Yesterday Harry Reid, the leader of the Senate, accused the Governor of diversionary tactics. “Anyone to suggest anything racial is part of the Blagojevich spin,” he said. With constitutional experts suggesting that he would be on shaky legal ground if the Senate sought to block Mr Burris, Mr Reid hinted that there might be a compromise. “I’m an old trial lawyer,” he said. “There’s always room to negotiate.”

Dick Cheney, the Vice-President, allowed himself the faintest smile of satisfaction yesterday at the prospect of Mr Obama grappling with the reality of power, saying there was no doubt that “the new adminstration will have its hands full”.

COUNTDOWN BEGINS

Today The US President-elect meets Democratic and Republican congressional leaders to discuss their legislative agendas, including a stimulus Bill aimed at kick-starting the US economy

Tomorrow Elected leaders for the new US Congress meet

January 7 President Bush hosts a lunch for Mr Obama at which he will meet former American presidents, who will share their experiences with the incoming leader. Jimmy Carter, Bill Clinton and George Bush Snr are expected to attend

January 8 Senate confirmation hearings begin for Mr Obama's Cabinet appointments

January 15 Barack Obama moves to Blair House, the official guest residence of the White House

January 20 Inauguration day for Mr Obama

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