Obama’s First 100 Days By Phoebe Berline April 2009 Hard choices lie ahead as Barack Obama and his new team scramble to rescue the shaken economy. A number of approaches could potentially create new jobs, reform and regulation to dig out from the crisis. And time is of the essence. The economy is shedding jobs at an astonishing rate; 2.6 million jobs were lost in 2008. President Obama’s stimulus package sales pitch is simple: “We don’t have a moment to spare.” But in this rush to move swiftly and boldly, the President cannot afford a misstep. To inspire consumer confidence, inject economic stimulus, and take the Republicans along with him – no small feat – will require finesse and execution. There are five things the President must do in the first 100 days. One: Fix the financial system, by addressing the foreclosure crisis and boosting banks capital requirements, money held in reserve to backstop loans. The financial institutions made bad loans with too much risk and are now trying to cut their losses and dump repossessed homes on the market. In essence, financial institutions now don’t want to “eat their own dog food”. Incoming President Obama would do well to focus on a proposed measure to give bankruptcy judges the authority to modify mortgages held by defaulting homeowners. Critics say largely voluntary efforts to modify loans haven’t been meaningful or happening fast enough economists say. Obama must step in to force lenders to modify mortgage terms – interest rates, duration or principal. This sends the message that taxpayer’s money will not bail out another large failing industry, without requiring it to significantly restructure and be better regulated first. Two: Reward business by lowering the business income tax. While this won’t provide stimulus immediately, a tax break would help strong businesses to survive and be in shape to lead a rebound later. It would also signal a new era of bipartisanship. Obama can put his money where his mouth is by prioritizing a Republican idea and help quell grumblings about the stimulus package’s focus on “Bridge to Nowhwere” infrastructure and possible pork belly projects Many good, innovative companies are building their best products ever, only to be met with ever shrinking profit margins, increased commoditization and more global competitors. Bailouts to unhealthy industries must be balanced with assistance to solid companies already cutting costs, doing layoffs and poised for a rebound – if the economy is expected to come back to health. It’s a win-win for business and for the President, who has got to get off on the right foot with and take the Republican leadership with him. It’s all in the execution, the bipartisan execution as the case may be. Three: Attach more strings to the 700 billion Troubled Asset Relief Program or TARP money and require more from so-called “lemon” businesses that the government has bailed out, such as the auto industry. Asking for more fuel-efficient cars only scratches the surface. In addition to fuel-efficient cars, the auto industry should also be required to show concrete improvements in efficiently running itself. There is a reason why Toyota is now the biggest auto manufacturer and we must face the music, unpleasant as it may be. Critics have long argued that compared to Japanese auto makers US players use too many different parts to practice “lean manufacturing”, overbrand by building too many similar models of cars. And unless something is done to improve the “us vs. them” labor relations chances for growth are slim. The government, by propping up weak U.S. automakers unable to compete - may just be give money to companies that don’t have a long-term future. BusinessWeek calls them the “zombie” debtors feeding off taxpayers, investors and workers – sapping the lifeblood of a healthier economy. For example, economics professor Edward W. Hill of Cleveland State University argues that GM could emerge as a better, revitalized company if it goes through the cleansing bankruptcy reorganization that changes its obligations to dealers, workers and retirees. Obama must not fall prey to “lemon socialism” - the investment of public money in the worst companies rather than the best. A time limit, regulations and strings must be attached to bailout money. Four: Expand the social safety net by extending unemployment and COBRA benefits. Let’s do the math. COBRA costs nearly 40% of a typical unemployment check. This means the average unemployed person who receives a $1,300 check must pay $500 to COBRA, and live off of $800. While this doesn’t create jobs, millions of middle class Americans falling below the poverty line of $10,400 is a crisis and requires action. Five: Finally, to be an effective modern president we believe Obama will need to address both the media and the social media – and not underestimate the power of the politico blogger. Partisanship as usual and vitriol has the potential to kill the best intensions and stall Congress. The Internet and blogging is an anonymous sport, and this lends itself to more vitriol and ranting than usual debate. The President must air policy issues out in the open in the blogosphere and engage with Rush Limbaugh, Sean Harrity and Matt Drudge. Roosevelt had more control with his radio “Fireside Chats” – today’s YouTube President does. not Barack Obama must choose his steps carefully as he moves swiftly in the first 100 days, to shore up the economy for a successful rebound.
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