Note to Obama, here's a to-do list for the economy

One of Barack Obama's most crucial and challenging jobs in the White House will be stabilizing the economy and re-engineering the financial system.What do financial and economic experts put at the top of the next president's to-do list? Here are some ideas:- Restore calmThe financial crisis "is more about fear than fundamental problems," says Jim Paulson, investment strategist with Wells Capital Management."I would much rather see the new president show a slower, calmer approach to this crisis -- one that is more about what has already been done, what is coming, with a lag, to help the economy -- and less about how bad things are," says Paulson. "We need a president who shows some optimism, confidence and calm."- Get credit movingIt looks like the government's $1 trillion-plus effort to prevent a financial meltdown is working, but the administration must make sure that money makes its way into the real economy."You have to get credit moving. It's not enough to recapitalize banks if the banks sit on their capital and don't lend. More of that has happened than active lending," says Stanford Law School Professor Joseph Grundfest.- Fiscal stimulusMost experts say the economy will need a shot of adrenaline, but differ on what form: tax cuts, government spending or another round of rebates."We need to stimulate the economy in a way that creates dividends -- something smarter than dropping helicopter money," Grundfest says. Rebates "are like a sugar rush. You feel good for a while, but it doesn't build strong bones or better minds."Grundfest prefers "investing in clean technology that supports our energy independence, rebuilding the part of our infrastructure that needs to be renewed or investing in education in a way that makes students smarter."Len Burman, director of the Tax Policy Center, hopes any fiscal stimulus "will be temporary and targeted at people who will spend the money and won't add to our long-term deficit." He prefers "giving the money to states that would otherwise have to cut back on public services" or using it to extend unemployment benefits.- Help housing, or don'tExperts agree the economy won't recover until housing bottoms out, but disagree on the extent to which government should intervene in the process."A political decision has been made that we are going to help homeowners," said Adam Lerrick, an economics professor at Carnegie Mellon University. "All (of the proposals) have shortcomings. In many cases, you are rewarding people for bad decisions. If you are a person who bought a house and paid a mortgage even though it declined in value, you're a loser in this process." If this process halts the decline in housing prices, some good will come of it. But banking consultant Bert Ely says, "I worry that these interventions will prolong the problem. It's better to let it run its course. A lot of people would be better off renting a house and paying even less than they would on a modified mortgage."- Rehab financial services"We need to emerge from this crisis with a financial services industry that looks very different," says Barbara Roper, director of investor protection for the Consumer Federation of America. The industry had been "making money by making loans, then tearing them up into pieces, putting them back together, insuring them and charging fees. You need to get back to a financial system that supports productive activity -- real businesses making real jobs creating real products. Maybe the industry won't make quite as much as it did in recent years, but those profits proved to be fairly ephemeral," she says.Ely agrees that financial regulation needs an overhaul but warns "there is a tremendous opportunity there to screw it up. That is going to be one of the major challenges of the new administration: doing it right."- Think long termAlan Auerbach, an economics professor at the University of California Berkeley, says it sounds ironic, but the first thing he wants the new president to do is talk about "long-term fiscal responsibility." The deficit this year could reach $1 trillion. "It will be important to signal a return to fiscal responsibility," he says. If we don't, interest rates will soar.Burman agrees. "If we keep on borrowing and the debt grows faster than the economy, over 5, 10 or 15 years we are going to go bankrupt as a country. At that point, you won't be able to borrow money to get us out of the financial crisis that results."I want the next president to talk to the public like they are not morons. I want him to say, 'I'm going to tell you the truth. We can't have lower taxes and more government spending (without) hurting our children and grandchildren.'" E-mail Kathleen Pender at kpender(at)sfchronicle.com.(Distributed by Scripps Howard News Service, www.scrippsnews.com.)