If President Elect Obama were the incoming CEO of a corporation, he would now be preparing for the first act of his tenure: A massive write-off of the mountains of rotted junk buried on the company's balance sheet and an announcement that recovery will take a long, long time.
This flush would clear the way for several years of better than expected results. It would also take advantage of the new leader's one chance to blame the sorry state of the organization on his sorry predecessor.
President Obama began this process last night, in his victory speech, when he noted that restoring the country's health might take more than a term. In the next few weeks, he should go well beyond this:
- The deficit will be more than $1 trillion a year for several years
- The country needs a massive new fiscal stimulus
- The housing market will continue to decline through at least 2010
- Interest rates and taxes will eventually have to rise (after the economy stabilizes)
- Weak corporations have to be allowed to fail
- Millions of homeowners will lose their house
- Unemployment will probably rise to 10%
- The government simply cannot "bail the country out"--not because it lacks the will, but because it lacks the power.
In short, Obama needs to acknowedge reality, erring on the side of overstating the problems and challenges, and he needs to prepare the country for several tough years. Because if he doesn't, within six months of his taking office, the country will have forgotten all about the prior administration and will instead be blaming everything on him.
