President-elect Barack Obama and Vice President-elect Joe Biden met with the Transition Economic Advisory Board on Friday in Chicago. (Source: Getty Images)
PART ONE OF A TWO PART SERIES
When Barack Obama takes office on Jan. 20, 2009, he will face daunting challenges and great expectations.
With two wars and a financial crisis that has had widespread global implications, the nation’s 44th president will have to act quickly and thoughtfully and begin to repair the damage incurred in the past eight years.
Obama clearly understands the importance of hitting the ground running Two days after his election, he met with top White House staff and prepared to start getting top security foreign policy briefings. On day three he convened a meeting of his transition economic advisory board and held his first press conference on the economy.
Citing the October’s 240,000 job losses and what he called the greatest economic challenge of our lifetime, he said, “Immediately after I become president, I will confront this economic crisis head on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity.†Where does he begin?
STIMULATING INVESTMENT AND GROWTH
According to Diana Furchtgott-Roth, a senior fellow at the Hudson Institute, the first item on Obama’s to-do list must be to restore confidence in the financial markets and the financial system to encourage investment and economic growth.
“The markets are scared that he’s going to raise taxes and damage the economy, which is sending the markets down and means less tax revenue,†she says. “He has to govern by showing his awareness of market incentives and not kill the goose that laid the golden eggs.†Because America’s economy is widely believed by experts to be in a recession, raising taxes on upper-income groups would be the wrong remedy, Furchtgott-Roth adds, because it would discourage investment and result in lost revenues.
She suggests such remedies as a five-year suspension of capital gains taxes to stimulate investment in the U.S. In addition, he should consider recapitalizing the banking credit sector by selling oil and gas exploration and drilling rights. “Oil companies have profits and they want to explore for oil and natural gas; banks need the capital,†says Furchtgott-Roth. “That would be a way of infusing capital into the banking sector without having the federal government and the taxpayer pay for it and could potentially raise about $50 billion.†Such steps would make it more feasible for him to implement some of the costly programs he proposed during his campaign.
Obama says that he intends to move forward with priorities such as clean energy, healthcare, education and middle class tax relief, and there are difficult choices to make. Jim Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities, says that it will be impossible to do everything he proposed during the first couple of years and Obama may have to delay some and phase in others. “So, for example,