For Richer or Poorer: Obama's Big Challenges

Not since at least Ronald Reagan entered the White House in 1981 has a new president inherited such dire circumstances as those Barack Obama will confront upon taking office.

The nation's already anemic economy appears to be weakening further. The federal budget deficit is expected to soar past $1 trillion this year and likely will remain above that extraordinary mark for years to come. The national debt may reach $14 trillion by next year, standing at 95 percent of gross domestic product. Other financial crises are looming in the Medicare and Social Security programs as well as with private pension funds.

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Much of Obama's attention since Election Day has been appropriately focused on the deepening recession. He's already asked Congress to send him a $775 billion economic stimulus plan within the next month. That plan, which may wind up as the single most expensive piece of legislation in the nation's history, includes a proven tool for bolstering the economy — $300 billion in individual and corporate tax cuts.

But the bulk of the bill centers on a massive public works program designed to create millions of jobs. The history of such federal initiatives, however, has been less than impressive.

John Cochrane, a professor at the University of Chicago's School of Business, told The Chicago Tribune last week that the concept of a federal economic stimulus is "taught only for its fallacies.'' Other skeptics, including Harvard University Professor Greg Mankiw and Nobel Laureate Gary Becker, note that stimulus plans often arrive too late, accomplish too little and pile on too much debt.

How should the new president and Congress respond then in the face of dire economic news?

A key step is to ensure that the stimulus package isn't loaded with pork.

A review of recent funding requests, all supposedly tied to job creation, from the nation's mayors reveals a long list of questionable projects, including plans to equip police in at least one community with Tasers.

Such a scattershot approach to job creation would likely not only waste time and money as the economy continues to sputter but also would drive up the deficit without a sufficient payoff.

One of Obama's early tasks must be to use a portion of his considerable political capital to confront the soaring national debt. Failure to do so — one aspect of George W. Bush's legacy — likely would inflict lasting damage on the nation's long-term economic prospects.

Obama also is succeeding a string of presidents who failed to confront growing problems in funding for Medicare and Social Security. Unless addressed soon, those time bombs will explode as more baby boomers retire.

The fiscal and economic tasks awaiting the new president are unquestionably daunting. He has, however, two things in his favor: the good will of millions of voters who have demanded change in Washington, and a Congress unlikely to risk strong opposition to a popular new leader during his first months in office.

The Obama administration's biggest challenge? Striking the difficult balance of addressing the current economic problems without ignoring the long-term implications of the soaring debt. Toward that end, the president must reach out to fiscal conservatives in both parties to counter the free-spenders and the kings of pork who pack both houses of Congress.

Barack Obama will be tested on the economy in the months ahead like few presidents before him. The financial fate of millions of Americans will rest on how well he succeeds.

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