Black MBA - Winter 2008/2009 - (Page 19)

A politician is rarely, if ever, accused of not promising enough on the campaign trail. However, this is the position Barack Obama finds himself in as the nation’s 44th president. The former senator from Illinois was elected president, in part, by promising a $175 billion stimulus package to jumpstart an ailing economy. Now, he is under pressure from Democrats and Republicans to up this amount, possibly to as much as $300 billion, or face even more doom-and-gloom news. ©David McNew/Getty News Images At a news conference in November announcing his economic team, Obama said, “The economy is likely to get worse before it gets better.” There are signs things are already getting worse. In October, the jobless rate reached 6.5 percent, the highest since 1994. Meanwhile, retail sales and consumer prices fell to the lowest on record. Economists expect the economy to shrink at least through mid-2009 as the country experiences the worst recession since the early 1980s. The new president has the thankless choice of piling up significantly larger deficits in the short term in order to get the stalled economy moving again or limiting deficit growth and risking another Great Depression. As Obama said in his acceptance speech in Chicago, “For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime – two wars, a planet in peril, the worst financial crisis in a century.” To attack the worst financial crisis in a century, the new president has decided to borrow a page from Franklin D. Roosevelt, who led the country out of a depression by aggressively launching the New Deal, a series of programs aimed at reducing unemployment, safeguarding bank deposits, curbing farm and home foreclosures and reinvigorating the economy. Under the Obama plan, the taxes of middle- and lowerclass employees will drop; additional spending will go toward repairing infrastructure, such as roads and bridges; there will be a major investment in energy alternatives and “green” technologies; there will be college tax credits; and help would be provided to families on the verge of foreclosure. But these plans cost money. President Bill Clinton left George W. Bush with a surplus of $128 billion. After a round of tax cuts, increased spending, an economic downturn and, later, additional costs associated with improving homeland security after the Sept. 11 attacks and conducting two wars, the surplus turned into a deficit. The federal deficit stood at $421 billion by last September. According to projections by the Senate Budget Committee, this number could reach $1 trillion to $1.2 trillion when the new stimulus program is added to the initial $700 billion bailout. “A trillion-dollar deficit is not something you would have seen in an economic textbook – it is something that even a science fiction writer would not dare mention,” Stan Collender, a former budget staffer for the House and Senate, told the Boston Globe. “What it tells you is that the next four years are going to be four of the roughest fiscal years in the history of the United States.” But William Spriggs, chairman of the Department of Economics at Howard University, feels that Obama has few viable options. “We’re in a recession, almost a depression,” he explains. “We can’t worry about 20 years from now. We must worry about tomorrow. If he has to spend $700 billion and that’s what it takes, spend it.” The nonpartisan Concord Coalition, a budget watchdog group, notes that additional funds, which must be borrowed, come with a price. Net interest on debt for fiscal 2007 was $237 billion – approximately 9 percent of the federal budget. The higher the deficit, the more the federal government must spend on interest payments, leaving less money for many of the programs Obama wants to enact. But Obama’s economic team is hoping that growth created by the stimulus plan – including a two-year plan to create a gross of 2.5 million new jobs – will offset the cost of the program and eventually reduce the federal deficit. If this is to be, however, it must work better than Bush’s plan that distributed $600 rebate checks. The rebates provided only a temporary boost in the economy. As he formulated his stimulus package, Obama moved to calm Wall Street by swiftly announcing his economic team and key cabinet appointments in November, far earlier than most presidents. He selected Timothy Geithner, president of the Federal Reserve Bank in New York, as his Secretary of Treasury; Lawrence Summers, a Harvard BlackMBA • Winter 2008/2009 19

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Black MBA - Winter 2008/2009 Contents Preserving Dr. King’s Legacy: Harry E. Johnson is Six Years and $100 million into his First Fundraising Effort Online: www.nbmbaa.org and www.blackmbaonline.com Up Front: Inauguration Takes Over D.C. From the President: Connecting With the Basics The First 100 Days – Already in Progress Back to Basics: Finances 101 Is the Middle Class Disappearing? – Your View From Medals to MBA Conference Highlights Market Forces: The Job of Trying to Find a Job in a Tight Market Applying to an MBA Program?: Avoid Making these Five Critical Mistakes How They Did It: Catching up with the Winning Teams from NBMBAA’s 2008 National Case Competition Change It Up: If a New Job is at the Top of your New Year’s Resolutions, it’s Time for Careful Planning and Preparation Bull Market: Now is the Time to Take Advantage of Web 2.0 On the Move: Member News, Promotions and More Backstage at BET: NBMBAA’s Leadership Institute Takes on BET’s Case for Growth Toronto Rising: NBMBAA’s Toronto Chapter is on a Progressive Track, Building Strong Partnerships and Exposure as Membership Climbs NBMBAA® Chapters: Find Your Local Chapter Here Do What You Love: Turning Your Passion into a Successful Business Requires Patience, Planning and Plenty of Hard Work Above and Beyond: Meet the Winners of the 2008 Wells Fargo/NBMBAA Entrepreneurial Excellence Award Decorating by Design: Michelle Rider Leaves Corporate Life for Entrepreneurship Culture Shock: Black Museums Nationwide Appeal for Greater Support from the People whose Heritage they Strive to Preserve Gear Up for 2009: Books to Herald Success in the New Year Advertiser Index: Who’s Who in the Issue

Black MBA - Winter 2008/2009

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