Obama offers plans to help a slumping economy

President-elect Barack Obama is poised to assume office under bleak economic conditions. With many Americans nervous about the country’s financial situation, Obama has outlined a number of measures he hopes to undertake to restore confidence and help families that are struggling.

As more and more people struggle with the aftereffects of layoffs and lost jobs, Obama hopes to extend unemployment benefits that could otherwise run out before the recipient found work again. He has also mentioned improving health care and education benefits. These changes in particular are likely to have a big impact on the middle class, a segment of the population that has been hit especially hard by the recent downturn.

Help for the American auto industry and its suppliers has also been proposed. The decline in American auto sales in recent times has led to widespread factory closures and unemployment. In turn, families with reduced incomes are less likely to buy new cars, so the industry suffers more. With government aid, American companies could focus on developing newer, more fuel efficient vehicles that have become popular since the price of fuel skyrocketed over the summer.

Those fuel prices put an unexpected burden on many budgets, including those of small businesses and state and local governments that maintain service vehicles. Another important tenet of Obama’s plan is to focus on the issues that both small businesses and local governments are facing to ensure that they can continue serving their communities.

--Bridget O'Sullivan

Financial meltdown hits higher education

As news about the economy continues to be bleak, even major universities are finding themselves scaling back. The ivory towers tend to be immune to small changes in economic conditions, but as incomes shrink, donations decrease and financial aid applications increase.

With the price of private school tuition barely within reach of many families even in good times, but as the economy slows, the burden seems increasingly hard to bear. Lower family incomes, rising inflation, and dips in the stock market could mean that many college funds may not go as far as parents originally planned.

Home equity lines of credit, an increasingly common way to pay tuition bills, are now no longer an option for many families. As home values fall, the cash does not exist to take out.

With the state of the economy in mind, colleges are planning to make changes to their budgets for the upcoming year. According to an Associated Press report by Justin Pope, schools such as Boston University are putting a hold on development projects.

Though private universities will have to work through the challenges of receiving fewer donations and fielding more requests for financial aid, public schools are also likely to have to reevaluate their spending decisions.

With incomes likely to be lower and aid programs more necessary, state governments will be forced to take a hard look at their budgets. Funding for state schools could be high on the list of items that get scaled back in the upcoming year.

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BusinessWeek ranks Boston as recession resistant

BusinessWeek ranks Boston No. 6 on a list of the best cities for riding out a recession.

Heralding the Hub's variety of resilient industries--including education, health and legal jobs--the list suggests that Bostonians armed with a 42.5% share of jobs in industries considered strong are in a good position to survive the financial meltdown.

The report cites Boston's world-class universities including Harvard and the Massachusetts Institute of Technology (not to mention Boston University, Northeastern and Suffolk) as an additional asset.

However, the city is at risk with its slew of finance, retail and hospitality jobs.

Click here for the BusinessWeek list.

US injects $250 billion in financial institutions

In an effort to get capital flowing from the government’s $750 billion bailout plan, Secretary of the Treasury Henry Paulson called together the executives of nine of the country’s largest banks for a meeting in Washington.

He announced his plan for the government to buy up a number of shares from each bank. The government is also planning to guarantee and insure more commercial debts and deposits.

Is it a $250 billion band-aid? Perhaps.

According to the plan, the more capital a bank has and the more secure it perceives certain risks to be, the more growth is facilitated. If the market for credit grinds to a halt because institutions are not lending or because they choose to hoard their resources, the more likely the economy will remain stagnant.

"I don’t think there was any banker in that room who was going to look us in the eye and say they had too much capital," Mr. Paulson says in a phone interview with The New York Times in reference to Monday’s meeting with bank executives.

Some of the institutions represent at the meeting are suffering more seriously than others from the current sub-prime mortgage situation. Executives from the less-affected banks reportedly objected to the new plan initially. Others disapproved of the new guidelines related to executive compensation packages.

Ultimately, in a matter of just a few hours, all nine banks had signed on to the agreement. The effects of the deal are unlikely to be seen immediately, however, because it will take time for the newly injected capital to translate into more accessible credit and more growth.

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--Bridget O'Sullivan