The morning after a hard-fought campaign is the time to savor the sweet taste of victory. And what a campaign it has been, scaling new political heights and plumbing new lows. So enjoy the morning after Mr. President, because that's really all the time you can afford.
You lead a nation divided, depleted and at a cross-roads. You have four more years to make a difference. The first 100 days of your second (and last) administration will set the tone for all that follows. You need to move boldly to create momentum by securing some early wins in both domestic and international spheres. At the same time you need to avoid some classic transition traps, in particular trying to do too much too fast. Focus unquestionably is the key to success.
In the domestic realm, your overarching priority is to sustain and accelerate the economic recovery. Here are three things you need to do:
Talk Congress down off the ledge. We are not on a fiscal cliff. Rather, Congress has taken the nation high up on a narrow ledge and is threatening to push us off. Unless the budget stalemate is resolved by the end of the year, crippling tax increases and draconian spending cuts automatically will take effect. More than 25 million middle-class households will face the Alternative Minimum Tax for the first time, which would add an average of $3,700 onto taxpayers' bills. Income reductions will sharply curtain consumer spending; a new recession is the likely outcome. Everyone from the country's best economists to the CEOs of our leading companies agree the answer lies in a "grand bargain" combining some increases in tax revenue with substantial cuts in spending. Your first priority is to force the lame-duck Congress to confront reality.
Stimulate more job growth. The economy remains on a fitful path to recovery. The tools of monetary policy — interest rates cuts and quantitative easing — have been deployed to their maximum potential. The housing market is stabilizing and jobs are being created, but not at a rate that will bring unemployment down to acceptable levels fast enough. Although the idea of spending more to generate economic growth is anathema in some circles, targeted investment in our aging infrastructure remains the single best thing to do to stimulate the economy. Unless growth soon picks up dramatically, your next priority is to push the new Congress to enact a substantial infrastructure investment bill. Yes, it will increase the deficit in the short run, and yes we need to address the structural issues with entitlements, but this is not the time for too much austerity.
Make America more attractive for business, large and small. The United States has one of the highest corporate tax rates in the world. It also has a byzantine tax code riddled with loop holes. The net result is that large companies keep profits off-shore and structure their domestic operations to take maximum advantage of the exceptions — with the net result that many pay little U.S. tax. At the same time, small businesses, which generate the majority of new jobs, are overly weighed down by regulation, hampered by inadequate access to capital, and effectively penalized by being taxed at personal rather than corporate rates. You need to lead the effort to reduce tax rates for companies and streamline the corporate tax regime. You also need to initiate a comprehensive review of how regulation impacts small business, and lead the effort to substantially reduce the burden.
On the foreign policy front, your administration faces a fractured and fractious world. While America remains predominant militarily and economically, new powers seek to assert themselves, established powers falter, and old tensions — religious and ethnic — burn ever hotter. Here are the three international challenges that you need to address in your first 100 days:
Pressure Europe to get its fiscal house in order. The largest single threat to the world economy is the implosion of the Eurozone due to sovereign defaults. Although the International Monetary Fund and the European Commission are doing their best, a fundamental divide between Germany and the rest of the Europe is preventing the comprehensive and painful political and economic reforms necessary to deal with this crisis. And the situation is deteriorating as economies decelerate and deficits remain stubbornly high. Your first foreign policy priority is to apply the maximum possible pressure on Europe to deal with these problems before it's too late.
Stop Iran from getting the Bomb. There is no question that comprehensive international sanctions are having crippling effect on Iran's economy. While exploratory talks between the US and Iran may be getting underway, there is as yet no demonstrated willingness on the part of the regime to end to its nuclear weapons program. You have correctly said that Iran cannot be permitted to acquire nuclear capability. Israel likewise has drawn a red-line, beyond which they believe military action will be the only remaining option. There appears to be agreement among intelligence agencies that Iran is nearing the point of no return. Your next foreign policy priority, then, is to further ratchet up the economic pressure on Iran, while at the same time preparing the public for the reality that military action may be necessary.
Engage with the new leadership of China. Finally, China is in the midst of a once-a-decade change in leadership, while at the same time launching a new Five-Year Plan that focuses on stimulating domestic demand and moving the economy away from its reliance on exports. A buoyant China increasingly is flexing its diplomatic and military muscles in the region, exacerbating tensions with neighbors including Japan, Vietnam and Indonesia. At the same time, it continues to artificially depress its currency to increase its export competitiveness. Although part of the World Trade Organization, China also is committed to doing everything in its power to create "national champions" in virtually every global industry; it is using onerous and opaque regulations to hamstring U.S. companies seeking to operate there. While there is nothing to be gained by contentious actions, such as labeling China a currency manipulator, the current leadership change is a once-in-a-generation opportunity to fundamentally redefine economic and political relations between China, the United States and the rest of the world. You need to seize that opportunity.
So congratulations, Mr. President, now dig in and make it happen. For at this cross-roads in our history we need your next term to be a success. And to have a successful term, it's essential that you have a successful first 100 days.