Friday editorial: The economy and Mr. Obama
Now comes the hard part. President-elect Barack Obama, having won a historic mandate for change, must make it happen.
He faces monumental problems: “Two wars, a planet in peril, the worst financial crisis in a century,” as he put it in his victory speech to a quarter-million supporters Tuesday night in Chicago. The financial mess will not wait until he takes office in January. He must start working now to revive the economy.
He can’t do so officially, but he can act to instill confidence in the still-shaken financial markets. The American banking system is on life support, dependent on a $700 billion infusion of taxpayer capital to prevent collapse. The credit crisis is dragging the nation into recession, possibly a deep one.
What the country needs now is an injection of confidence and a road map to recovery. Mr. Obama must begin to act quickly to lay a plan, in detail, well before taking office.
Mr. Obama has shown an unflappable cool and an ability to work with members of the opposing party. He will need both virtues now. Very soon, he should name a “shadow” Treasury secretary to work alongside Bush administration officials, Congress and the Federal Reserve. The goal should be to influence decisions now, so that they don’t have to be done over in January.
A lot of policy will be made before Inauguration Day. The lame-duck Congress will meet this month to consider a new $100 billion pump-priming stimulus plan, an idea Mr. Obama supports. It’s crucial that the details of this plan pack some real economic punch, rather than merely pander to special interests looking for tax breaks and wasteful subsidies. Mr. Obama, as a sitting senator and president-to-be, is in a unique position to shape it.
Federal Deposit Insurance Corp. chair Sheila Bair has a solid plan to guarantee renegotiated mortgages for strapped homeowners. It could save up to 4 million Americans from foreclosure and help build a floor under housing prices. Ms. Bair’s plan is getting little support from the Bush administration. Mr. Obama’s support could get it moving.
Meanwhile, the Big Three automakers are very sick; General Motors and Chrysler may be headed for bankruptcy within a year. That threatens hundreds of thousands of auto workers and retirees. The auto companies are asking for help, too. One of Mr. Obama’s more difficult early decisions may be whether the auto industry is too big to be allowed to fail or whether it is past saving.
Throughout his campaign, Mr. Obama’s team of economic advisers has included two sages: Robert Rubin, who was Treasury secretary under President Bill Clinton, and Paul Volcker, who crushed inflation in the early 1980s as chairman of the Federal Reserve. Both are said to be under consideration by Mr. Obama for the top Treasury post.
But Mr. Rubin says he doesn’t want the job, according to Bloomberg News, and Mr. Volcker’s age, 81, makes him a less likely candidate.
Another possibility is economist Lawrence Summers, 53, who succeeded Mr. Rubin as Treasury secretary under Mr. Clinton and later had a stormy tenure as president of Harvard University. Also on the list is Timothy Geithner, 47, a Treasury veteran who now serves as president of the Federal Reserve Bank of New York. Early on, Mr. Summers and Mr. Geithner started advocating for a bailout for the financial system.
Mr. Obama needs someone with deep knowledge of the financial markets and a reputation that will inspire confidence. Mr. Rubin and Mr. Geithner meet that standard extremely well.
Uncertainty is the enemy. It creates worry, making banks unwilling to lend and consumers afraid to spend. By showing a steady hand and making smart decisions, Mr. Obama could begin restoring the economy to health even before he takes the oath.
Caption: Former Federal Reserve Board Chairman Paul Volcker looks on as Democratic presidential candidate Barack Obama, D-Ill. speaks during an economic summit, Tuesday, Oct. 21
“Mr. Obama has shown an unflappable cool and an ability to work with members of the opposing party.” …
Unflappable cool? Bwaaaa-ha-ha!!
“ability to work with members of the opposing party” Have another donut.
This is an editorial? Not an original thought in it.
How ‘bout we call it a rip ‘n read summary of other pundits’ views.
Here is Obama speaking about the financial crisis:
“My great Americans. Today we face a challenge of great proportion. Uh uh uh. Change will bring different things to our great nation of diversity. With the power of the people and a sharing of our nations great wealth, we will be able to take over, uh uh, I mean revive the failing industries. Like one of my heros Karl Marxinburg said, ‘alone we are nothing. together with your neighbor’s riches, you are something.’ This is a philosophy I live to this day. Change! Change! Is here! Submit to my authority.”
BobZ - Since you’ve provided no evidence to the contrary, it appears that you can’t refute anything in the editorial. But by your reaction one would think there are many instances where Obama could be shown to be flappable - find one.
I have a strong feeling the post will be offered to Summers. I believe whomever he picks the person will be someone who buys into the theory that the bailout was the correct action. Since a growing number of economists don’t agree with this, the list of candidates is shrinking. Between him and Biden, there should be no shortage of good sound bites for the next 4-8 years.
Take a idea from Clinton/Gore and issue federal revenue bonds for re-construction of our states’ educational infrastructures. States could get money from the feds to rebuild schools, physical plants and other facilities which are in disrepair. The interest and bond payments become part of our structural debt (much like entitlements) and set up the economy for quick recovery by injecting some $100-200 billion into new construction with high paying jobs and higher emplyment, and more taxes with less unemployment and all its attendant woes.
Next, have the Office of Technology Assessment and the Commerce Department do analyses of non-tariff trade abrriers to import of US goods, focus on safety or consumer protection or energy ratings. Then do a loan guarantee to companies to build these products to higher safety, consumer protection and energy ratings so they are more readily exported for the traditional high quality of American goods. These guarantees could spark re-investment in high paying manufacturing jobs in the rust belt states and help their economies, lower unemployment and all its attendant problems.
We need to stop playing shell games with the budget and using federal highway funds as part of what “balances” the budget (or not during the Bush years)and get our roads, bridges, and economic infrastructure back into shape. Civil engineers have done a national study and have identified projects and costs. We need to do the projects and fund them asap. The resulting employment of many in high paying construction jobs will boosts the economy, reduce unemployment and its attendant ills.
We have to follow through on the failed committment of the Bush administration to rebuild after Katrina. Too many are still in FEMA trailers so long after the disaster. To the degree that schools and infrastructure monies may be used, they must and should be used first in these hardest hit areas of our country.
Oh, and Obama should bring back Rubin. Mr. Rubin’s reputation and background will serve Presidedent Obama well and ecourage our allies and the international markets as he and President Clinton presided over the longest peacetime period of economic growth in our history.
I was at hearings where former fed chairman Volker testified as an expert witness for the phone company on post-divestiture telephone rate regulation, he was arrogant, elitist, and condescending.
The Missouri PSC ignored him, so should President-elect Obama.
“WIN now!” yeah that worked, eh? A coupla recessions, ridiculous interest rates and massive unemployment later; “Look, Ma! No more inflation!”
I agree that any new spending package should be geared toward a certain goal, like improving the highway/education infrastructure that you’ve mentioned. I don’t like the idea of a “stimulus package” that consists of a $200 check in everyone’s pocket. I would like to see the money go to state or municipal governments to fund local projects. The stimulus checks will mostly benefit retail business.
> We have to follow through on the failed committment
> of the Bush administration to rebuild after Katrina.
On the contrary, the federal government should NOT be subsidizing rebuilding a city that sits below sea level - not should it insure it if the private sector rebuilds. I live next to a tiny drainage creek, and I have to have flood insurance, to the tune of around $1,300 a year. It costs me the same amount as people in NOLA and Galveston. Even in the most recent floods, the creek was nowhere near my house.
Just why anyone should believe obama can instill confidence and rescue the economy is beyond me. Democrats are the sole reason we find ourselves in this housing messin the first place. Liberal Democrats forced banks to make bad loans to the people who could least afford them, then guaranteed those bad mortgages by the federal government thru fannie and freddie.
We have just put the fox in charge of the chicken coop, but you still believe the “messiah” can walk on water. If you continue to dream on, we’ll have Nov. 4th declared a new holiday: obama president day. It’s going to be a long, miserable four years.