Top of Obama’s to do list: Fix economy

As memories of celebrations and extravagant inaugural balls start to fade, the hard work of the new administration begins.

As memories of celebrations and extravagant inaugural balls start to fade, the hard work of the new administration begins. First on President Barack Obama’s agenda: prioritizing a daunting to-do list.

Few presidents, with the exception of Franklin D. Roosevelt, have faced so many challenges upon entering the Oval Office. Clearly, the economic crisis will dominate our new leader’s first 100 days.

“Starting today, we must pick ourselves up, dust ourselves off and begin again the work of remaking America,” Mr. Obama said in his inaugural address, acknowledging the enormity of the job with his typical understatement.

He confronts a deepening economic crisis that many financial experts think could be the worst since the Great Depression. Banks are folding, the stock market continues to slump, and the jobless numbers keep climbing.

And let’s not forget that the housing market is in an advanced state of meltdown, while Detroit is effectively bankrupt.

Mr. Obama obviously is aware that he can’t solve every international and domestic problem immediately. But since both Main Street and Wall Street are scared to death, his priorities should be clear: making the economy his No. 1 focus, even if that means putting other reform issues on the back burner.

Unfortunately, that could mean putting on hold plans to fix our beleaguered health care system, encourage clean-energy infrastructure programs and reform immigration policy.

But the deepening recession and the economy’s fragile condition require Mr. Obama’s immediate — and concentrated — attention.

It is scary out there.

The crunch that began in the housing sector has spread to credit cards, car loans and commercial property. All lending is affected, including essential loans to small and midsize businesses.

Loan guarantees, direct investments and furious federal borrowing are likely to propel the government’s budget deficit past the $1 trillion mark, the highest in history.

The Obama administration inherited a $700 billion emergency financial-bailout package passed by Congress in October, of which $350 billion already has been spent, mainly in the form of bank capital injections.

Before taking office, Mr. Obama was able to persuade Senate Democrats to release the remaining bailout funds. But the tight vote in the Senate (52-42) made it clear that he will face significant opposition among Republicans and “Blue Dog” conservative Democrats to expand government intervention in the financial sector.

A congressional oversight body already has criticized the way in which the bailout money was disbursed and the lack of controls over its use.

Congressional Democrats would like the next sack of cash to be used to help victims of the credit crunch, including those who face mortgage default and housing repossession. They also want to impose tougher conditions on banks that have accepted federal bailout funds.

Mr. Obama has indicated his support in principle for such an approach.

With the banking system still weak, however, it isn’t yet clear whether the financial system as a whole has recovered sufficiently to resume lending. Nor is it clear how much should be set aside in case other financial institutions become threatened.

“The question we ask today is not whether our government is too big or too small but whether it works — whether it helps families find jobs at a decent wage,” Mr. Obama said in his inaugural address.

Mr. President, we are waiting for the answer.

Jim Pavia is the editor ofInvestmentNews.