Barack Obama's historic victory has given many in this country, and across the world, hope for a brighter future. But make no mistake; the President Elect is facing a global political and economic landscape more hostile and challenging than it has been in a generation. He has to lead with confidence and decisiveness, but with actions that are grounded in facts, common sense and broad-based support wherever possible. While it is tempting for him to completely distance himself from the policies and practices of the current administration, the fact is that abrupt shifts, if ill-considered, could do immense damage to the economy and the country at such a delicate time.
There are a few guiding principles I believe President Elect Obama should follow, some of which might not comport with Democratic dogma but which are necessary to deal with a perilous social and economic situation that could plague us for a decade - or more.
- Do not raise taxes. For anybody. Individuals. Corporations. Anybody. Period. We need economic stimulus. We need to encourage investment. We need people and companies to re-build over-leveraged balance sheets. Economic activity is going to slow, and the last thing individuals and corporations (which are simply an amalgam of individuals) need to be burdened with are higher taxes. If anything, tax rates should fall. Further, the tax code needs to be dramatically simplified. Complexity increases costs, and distorts the power of tax policy. Investment should be encouraged and rewarded. Rules should be very straightfoward and broadly applicable across industries to mitigate the effect of lobbyists and special interests.
- Do not allow "free riders." The way TARP funds are being disbursed, with a "come one, come all" spirit, is nothing but a squandering of U.S. taxpayer dollars. That money should be used to close weak firms, restructure ailing firms whose failure poses real systemic risks and increase deposit insurance thresholds. It should also be used to recapitalize critical institutions whose assets are marked-to-market, leaving a gap in regulatory capital levels that can be filled - temporarily - with TARP funds. TARP should be about building confidence in the U.S. banking system, not providing cheap capital for any bank that wants it.
- Insist on financial statement transparency and support a push towards exchanges. The integrity of financial statements needs to be unimpeachable. Problem is, with the incredible latitude provided by current accounting rules investors simply lack confidence in the veracity of bank income statements and balance sheets. And this says nothing about the trillions in off-balance sheet liabilities plaguing the system. Push for greater clarity and transparency in accounting rules, such that investors will once again be willing to buy the shares of our financial institutions and hold them for the long haul. This also speaks to the moving of over-the-counter derivatives obligations on to exchanges, to address both counterparty risk issues as well as valuation issues that have damaged our financial system.
- Be ready to invest in core infrastrucure. As the global deleveraging kicks in and economic activity slows down, millions of people - factory workers, service professionals and the like - will be out of work. Unemployed people spend very little money. It is also true that this country's aging infrastructure has acted as a millstone around our necks, curtailing current growth while moving the obligation into the future. This culture of deferral of pain has to stop. Monies that would be spent providing capital to healthy banks and financing distant wars can be used to support state and federal projects to upgrade our airports, roads, ports and waterways. This is a real long-term investment with an attractive ROI. But our new President needs to rise to the challenge and work with both state and federal officals to prioritize projects and get them done quickly, efficiently and with the greatest bang for the buck.
- Support education at all levels. We need both a strong public school system as well as robust independent school alternatives. Local accountability. More flexible work rules. Merit-based promotions and raises. Better pay. Vouchers for those needing tuition assistance. We can't get this wrong, as we have done consistently during my lifetime. Our educational system is an embarrassment on a global scale. Smart, curious, confident, well-rounded citizens are what's going to make this country, and our world, strong. We are not doing our part. The President Elect needs to make this a very high priority.
- Fight against short-termism. This means making hard choices and tackling seemingly intractable problems. JFK had it right - "...what you can do for your country." What President Elect Obama can do for our country is to take the long view, to prioritize the most pressing immediate issues (e.g., economic weakness and credit crisis) but to make real progress on a few critical long-term problems (e.g., social security, health care costs, etc.). These steps will not be politically popular. But they will help get dialogues going around issues that most politicians are simply too scared to talk about. It's always about the next election cycle. Someone needs to stand up and say "NO." And that person can and should be Barak Obama. Right now.
- Re-establish U.S. credibility on the global stage. This doesn't mean being everybody's best friend, but it does mean regaining the respect of our allies and others as a smart, thoughtful, humane but strong people. And this perception will have to originate from our Commander-in-Chief. We need to be led not by gut but by reason, not by emotion but by thoughtfulness, not by unilateralism but by a desire to work and build like-minded coalitions wherever possible. The problems of today, both economic and political, are far too large for us to handle alone. We need our friends and allies, now more than ever.
President Elect Obama has his work cut out for him. His first term will be among the most challenging in the past 30 years. But what he will have is a clean slate, a fresh start, a chance to enact policies and to lead with a confidence and clarity that has been so lacking from our leaders this millennium. And he will have the support of the American people.
He has a mandate to lead a people starving for leadership. His chances are few, the risks are great. But hopefully he will rise to greatness by focusing not on party but on all people, by shedding dogma and orthodoxy and making the hard decisions without bias or fear. This is a very special time in our country, which is unfortunately mixed with one of the most difficult and scary times in recent memory. I am confident that we, as citizens of the U.S., can help the new President achieve greatness. And we will all be the better for it.