How to fix a broken economy

Judging by his performance to date, President Bush can use all the help he can get. Here are some expert suggestions.

By Salon Technology & Business staff

Jul 24, 2002 | As the stock market continues its free-fall toward a bottom that seems ever more distant, while an endless progression of mighty corporations seize the headlines with their confessions of fudged numbers and faked profits, an increasingly jittery nation is looking to the CEO in chief for reassurance.

So far, neither the markets nor individual Americans are hearing what they want. President Bush's poll numbers are softening, and his stern remonstrations against corporate criminals do not appear to have instilled any backbone in investors. With each day, the bear market becomes more fully entrenched, the retirement nest eggs of millions of Americans wither away a little further and the sense that corporate America is a playground for corrupt delinquents strengthens.

It is true that the stock market is not the economy. It is also obvious that much of the corporate malfeasance that is currently being laid bare before a disgusted public began occurring long before Bush became president. But such caveats are becoming less and less helpful to the current administration, as each new revelation of accounting fraud and each new slump in the Dow slam into their predecessors like so many freight cars piling up against a suddenly stalled locomotive. At some point, one has to stop blaming the train wreck on the previous conductor.

But what can President Bush do? Should he make examples of some of his Cabinet members and agency heads, such as the bizarrely ineffectual treasury secretary, Paul O'Neill, or the woefully compromised SEC chief, Harvey Pitt? Should he try to seize the moral high ground back from Congress, and demand tougher regulations and accounting rules? Does he dare address the nation publicly again, when his last outing provoked renewed outbursts of despair on Wall Street?

There are no easy answers -- but then again, no one ever said being the CEO was supposed to be kid's play. Salon rounded up a gaggle of experts on economics and politics and asked them the pertinent question: If you were George W. Bush, what would you do to stop the bleeding?

Paul Tiffany, professor of business and public policy at the University of California at Berkeley

Bush needs to take dramatic and symbolic steps to let the nation know that he is aware of the depth of the problem and is taking action to rectify the situation. So far, all of his speeches, responses to media questions, radio addresses, etc., have been nonstarters. This is because he has essentially said nothing, other than that executives should behave ethically, etc. -- no news there. His call for a tougher accounting standards board is, I believe, being perceived as a weak bureaucratic response to a problem that requires national leadership.

There is an interesting analogy here to the fear gripping the nation after the 1929 market crash. The sitting president, Herbert Hoover, effectively said there was nothing to do but sit tight, wait it out, and in the long run better times would return. This prompted John Maynard Keynes' famous retort that "in the long run we are all dead."

Also note that when Hoover was replaced by Franklin Roosevelt in the 1932 election, one of the first actions the new president took was to go to the airwaves and start his so-called fireside chats, radio addresses to the nation that were meant to reassure the public that their president was aware of the issues and was fighting them hard.

Bush, so far, has been utterly incapable of taking this leadership role.

Potential actions include: 1) replace Pitt at the SEC, install a new chair who is above reproach -- a Warren Buffett kind of individual; 2) order the SEC to open all the records on his prior Harken Energy transactions and show the public that there is nothing to hide, he is clean as a whistle; 3) replace either or both Larry Lindsey at the Council of Economic Advisers and Paul O'Neill at Treasury, then install known figures of indisputable integrity and knowledge of markets and financial policy/economic policy.

These actions are, as noted, symbolic. However, with emotions running rampant I believe that such a dramatic and symbolic step is necessary to grab the attention of the public.

While I hold out little hope that Bush would actually do this, it nevertheless does strike me that the true heart of this matter is the continuing problem with political campaign financing and how politicians are essentially beholden to special interests (primarily -- but not only -- business) in order to generate the funds necessary to mount a serious political campaign today. As such, Congress (and state-level governments as well) has seriously weakened the regulatory and bureaucratic controls that have in the past tended to minimize the potential for problems, such as the current ones we are witnessing with the accounting profession. Were Bush to call for serious campaign finance reform, similar to what McCain has advocated for several years, it could do wonders to restore credibility to Bush's promises to crack down on financial market behavior by business and executives.

Next Page: No need to go overboard -- just lock up the bad guys

• View blog reactions