President-elect Barack Obama has made history. He triumphed in a rough-and-tumble campaign to become the first African-American elected to the highest office in the land. Now big questions loom over what the future of his presidency will look like. More specifically, what will he and the new Democratic Congress do to revive America's ailing economy?
It's clear that our new leaders have a tough job ahead of them. U.S. employment has fallen by 1.2 million in the first 10 months of 2008. Meanwhile, paychecks have dropped by 2.5 percent (adjusted for inflation), according to Heidi Shierholz, an economist at the Economic Policy Institute in Washington, D.C.
A Bumpy Ride Is Inevitable
So America is ripe for a remedy, but experts caution it's too early to say with certainty what the new administration will do. Some say there are both long- and short-term moves Obama can make to help improve the situation. Others warn, however, that whatever steps he takes will only serve as a cushion for the inevitably bumpy road ahead.
"The Democratic takeover won't do much in the short run (3-9 months). While stimulus package(s) will soften the current deeply declining economy, we are facing a deep recession, perhaps the worst since WWII," says Philip Friedman, president emeritus and professor of economics at Golden Gate University in San Francisco. "In the long run, 2-5 years, productivity and innovation will drive growth and thus wage increases."
To improve matters in the long run, the Democrats should make policy changes such as research and development subsidies, education grants, and worker-retraining funds, Friedman says. Amit Batabyal, Gosnell Professor of Economics at Rochester Institute of Technology in Rochester, N.Y., says America needs to focus more on policies with a long-term payoff, such as education. Making sure workers have the education, skills, and training they need for in-demand jobs can reap benefits for two to three decades, Batabyal says.
Aspiration Needs a Rebound
Shierholz suspects Obama may take steps to expand unemployment insurance, shore up state budgets, and put a job-creation plan in place -- all of which could help boost incomes in the short term. Obama also has touted a plan to create 5 million new jobs by investing $150 billion over 10 years in clean energy, something Shierholz and others see as a long-term step in the right direction.
In addition, stimulating investment in the business community is critical for increasing the number of jobs available, says Maurice Baskin, an attorney who represents employers at Venable LLP in Washington, D.C. Businesses are currently squeezed by the credit crunch, Baskin explains, and they're sharing the pain with employees; reversing that means keeping a "lid on taxes" and not imposing new regulations on businesses, which can hinder their competitiveness.
Finally, stepping back and taking an even broader view, many experts agree that, beyond concrete policies, our new leaders must give workers a sense of hope. "If you put $500 in workers' pockets, that's not going to make the economy right and solve the issues. The issues are solved by leadership inspiring people back to aspirational behavior, which has driven this country all along," says Bernard Layton, managing director at the Chicago office of Stanton Chase International, an executive search firm.
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