By Stanley W. Samarasinghe

US is currently bereft of political leadership, especially on the economy when the country is facing its worst economic crisis since the Great Depression of the 1930s. President Bush is a lame duck president. His numerous statements on the economic crisis hardly get mentioned in the media. In any event nobody believes that he has a profound understanding of the economy. The Republican presidential candidate is a self-confessed innocent of economics. Barack Obama’s current lead in the polls is almost entirely attributable to the belief of the US voters that he has a better understanding of the economy. But he too has so far failed to make a major speech that is coherent and integrated that lays out what he would do if he becomes the president to address the immediate crisis as well as the long term health of the ailing economy. Obviously in a rapidly changing situation there are political risks in laying out ideas that a few days later might look to be lame. But now the fundamentals of the present crisis are clear. Smart and reliable leadership demands some degree of risk taking. Americans are hungry for a clear vision and strong leadership to assure them that somebody is capable of steering the economy that is adrift. Obama has the opportunity fill that leadership vacuum and seal the presidential election in his favor.

He should make a major economic speech that should lay out some sort of credible and integrated plan to salvage the economy from the present crisis and put it back on a firm and clear path to recovery. I identify six major components to a successful Plan/Strategy that has both short-term as well as long-term components. The latter is important to demonstrate that Obama is able think and plan beyond the immediate crisis and is animated by a vision of change for the economy.

1. Financial institutions – unclogging the credit arteries: The recapitalization of the financial institutions and some kind of loan guarantee by the government is a must. Obama’s idea of loans for small business that he spelt out yesterday can be a part of this strategy.

2. Jobs and incomes: Assistance to Small Businesses mentioned that Obama proposed a few days ago is one element. A second government stimulus package – this time on infrastructure development - is a second element of the jobs and income growing strategy. Third, immediate Federal assistance to state governments, counties and local government institutions that need help. Such help can include direct grants and loan guarantees as well as grants from a newly established Federal Infrastructure Development Fund based on the second stimulous package. Fourth, Obama has to flesh out what he means by saying that there would be tax breaks for corporations that invest in US rather than abroad. That will instill confidence in voters in some of the swing states such as Ohio and Pennsylvania. Fifth, Obama’s energy plan can be a major aomponent of a job abd economic growth strategy. Fifth, his healthcare plan fits in nicely with the jobs and income theme.

3. Mortgages: Obama needs to make it very clear how he proposes to assist those who are now facing foreclosure. Obviously if the credit conditions ease and the job slide is reversed and the recession is minimized that will help. But voters need something more specific from Obama. McCain’s idea of wholesale purchase of bad mortgages is a bad idea and Obama has rightly criticized it. But voters want to hear what Obama would actually do that is superior to what McCain has proposed.

4. Reducing the public debt: No nation can live beyond its means. In the Bush/McCain 8 years the national debt has almost doubled to ten trillion dollars. We are now beholden to the Chinese for loans and the OPEC for our oil. Both have to be changed. The latter will be addressed by the Obama Energy Plan. The former has to be addressed by cutting down Iraq war spending, faster economic growth to bring more tax revenue and eliminating waste in government. It won’t be easy to reverse the Bush/McCain profligacy and cut down the national debt but we have to do that. Democrats did it once under Clinton and they can do it again under Obama.

5. Long-term reform of the financial system: We cannot afford to allow Wall Street to run riot again, certainly not after the taxpayer had to sacrifice to rescue the system. Obama has to appoint a bipartisan Presidential Commission to study and report within the first six months of the Obama presidency how we should reform the regulatory system so as to avoid the calamity that befell us this time while strengthening the creative energies of the American financial institutions.

6. International cooperation - Short Term: US must give the lead to reverse the present slide. While it is hoped that in the next three weeks everything possible would be done to fix the system it would be a priority of the Obama transition team to address the issue in cooperation with the outgoing administration and the Group of 7 and others concerned in the international community. Long Term: The international financial system that we currently have emerged in the aftermath of the World War II. It did well for the second half of the 20th century. But we have to think of reforms to meet the needs of the 21st century. The Obama administration will have to address this first at the official level. The process can end with a summit of global leaders to approve a redesigned international financial architecture.

If Obama is able to make a major speech roughly along the above lines preferebaly before the third presidential debateit it will give the public some time to grasp the main ideas. Then he can use the Wednesday October 15th debate to elaborate on a few points that particularly capture the imagination of the public and/or need further clarification. Most important, he must make it very clear that he has a well integrated and carefully laid out PLAN unlike McCain who has started to come up with semi-digested ad hoc proposals. It is important that Obama use the term PLAN when he descirbes his strategy because people realize that the present crisis is systemic and would affect every aspect of the economy from banks, credit and the stock market to housing, jobs, income, and the local school system and the shelter for the homeless. People desperately need reassurance in these uncertain times and Obama has to clearly covey the message that he is fully confident of what he plans for the country from day one. He will do a service to the people and to his campaign for the presidency.

The leaders who gathered in Washington DC this weekend failed to produce a coordinated plan of action to address the financial crisis. This is more than a hint from the other members of the G7 countries that they do not have full confidence in the current leadership of the US. Obama has to demonstrate to the world that America is capable of providing that leadership.