For Obama, the economy can't wait

His top priorities are stimulus proposals, the 'G-20' summit, and picking a Treasury chief.

from the November 7, 2008 edition

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"The immediate priority is to determine the extent and nature of the next stimulus," says Robert Shapiro, a former Commerce Department official now at Sonecon, an economic advisory firm in Washington.

It's possible that Congress will pass a modest stimulus package, in a lame-duck session after the election, and that President Bush will sign it. Then a larger stimulus may follow in January.

Many Americans saved their tax rebates earlier this year, so the economy didn't get much bang for each buck spent on that initial effort to boost the economy. Next up are measures including funds for cash-strapped state and local governments, new infrastructure projects, and expanded unemployment insurance.

"The core of this stimulus ought to be … down payments on the investments that the president-elect has said he wants to aggressively advance during his term in office," Mr. Shapiro says.

Those could include efforts to modernize the electric grid, digitize medical records, and make federal buildings more energy efficient.

The focus on economic revival may also cause Obama and his team to focus with keener attention on the housing market and the possibility of a new mortgage-modification plan designed to prevent foreclosures.

The risk in housing is that once-booming home prices overshoot on the way down, further damaging consumer confidence and the health of banks. If that happens, it only makes it harder for Obama to succeed in the rest of his agenda.

Although Obama's team will begin to influence policy well before January, much of the effort focuses on simply being ready to go upon inauguration. That alone is a daunting task, given the range of economic woes and the complexity of Treasury Department rescue measures that the Obama administration will take over.

The good news is that the Obama and McCain campaigns both started working on potential transitions ahead of traditional schedules, Mr. Lilly says.

"That was at the urging of a lot of people who have been through transitions" and have seen how important and difficult they are, he says. "There are lots of things that happen during a transition that you can't go back and redo a year later."

Officials at the Bush Treasury Department will have Obama's incoming team at their sides in coming weeks, so they are ready to manage the billions of dollars recently appropriated to fund a rescue of the banking system.

An added complexity: The financial crisis is global in scope. The G-20 summit highlights the demand for new approaches to regulating and supervising large financial firms.

Already, nations have moved simultaneously to cut interest rates – a trend that continued in Europe on Thursday. At next week's meeting, world leaders and their finance ministers plan to outline goals and principles that will guide an effort to put the financial industry on sounder footing.

The details will have to be worked out during Obama's term.

"He's obviously going to want to control that agenda" as much as possible, says Benn Steil, a financial expert at the Council on Foreign Relations in New York. He says Obama himself may stay on the sidelines, while newly named Treasury picks confer with their foreign counterparts.

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