How Bush may boost the economy

Any short-term push to stave off a recession could face political and budgetary challenges.

NEW YORK (CNNMoney.com) -- Word is that President Bush may propose new measures to boost the economy by the time he gives his State of the Union address later this month.
While he has steadfastly maintained that the economy is fundamentally strong, the fact that the president is considering a so-called fiscal stimulus package is an indication that the Administration is getting worried.
Such a package would aim to ward off a recession, the fear of which has grown stronger in the wake of discouraging data on jobs, rising energy prices and a slowing housing market.
There is also an indication that leading Democrats might be working on a plan of their own. A spokesman for Senate Finance Committee Chairman Max Baucus (D-Mont.) said in an e-mail to CNNMoney.com that Sen. Baucus "already has ideas of his own about the possible need for an economic stimulus package this year and is planning for the Finance Committee to discuss very early in the session what shape such a package might take."
Tax cuts on the table
It's not clear what measures the White House is considering, but it is widely believed that tax cuts are among them. In that realm, there are a number of options the president could propose, but all of them carry political costs, economic costs or both.
One option that economist Mark Zandi of Economy.com thinks might help is a temporary tax cut, much like the $300 tax rebate Americans got in the wake of Sept. 11. "It was well-timed and was significant for lower and lower middle-income households," Zandi said, although he acknowledged that not all economists agree about how successful the rebate was.
But a new rebate will likely draw criticism. In 2001, the government had the advantage of a budget surplus. Now it's operating with a deficit, which could raise concerns about the cost of a rebate. "Where's the money going to come from? [A rebate will] take it from some other place in the economy," said Chris Edwards, director of tax policy studies at the libertarian Cato Institute, which advocates for limited government and free markets.
Zandi thinks it might also make sense to make President Bush's income tax cuts for the middle class permanent, a move that leading Democratic presidential candidates have indicated they'd support. Where they part company with the president, however, is in making those tax cuts permanent for high-income households, too. So if the president did push for an extension of his tax cuts for the middle class, that could undercut his stated goal of making his tax cuts permanent for everyone, Zandi said.
Zandi would also advocate making the lower rates on capital gains and dividends permanent for everyone. Despite his belief that the federal government should not try to control the short-term performance of the economy, Edwards agrees that such a move could help stabilize the markets by giving investors more certainty about their investment tax bill. It also would reduce any pressure investors might feel to sell their holdings before the investment rate cuts expire.
But the cost of making any of the Bush tax cuts permanent is a sore point for fiscal watchdogs, who contend such cuts are unaffordable in the long term, given the growing budgetary demands of Social Security and Medicare as well as the war in Iraq.
Of course, with any tax-based stimulus, the potential benefit of its short-term effect has to be weighed against its long-term cost, said Clint Stretch, a federal tax policy expert at Deloitte Touche. "[You must consider the net benefit] if you have to turn around to the credit markets and borrow the money to pay for it."
Non-tax options
President Bush could also call for measures intended to stimulate the housing market, Zandi said.
Bush has already said Congress should act quickly to pass a number of housing-related legislative proposals that he supports. One key measure would reform the Federal Housing Administration (FHA), which would make the relatively low cost FHA-insured mortgages more readily available to consumers who want to buy homes and to those who want to refinance out of unaffordable subprime loans.
The White House also might consider calling for a temporary increase in the size of mortgages that Fannie Mae (FNM) and Freddie Mac can purchase from mortgage lenders. These two government-sponsored enterprises guarantee the purchase and trading of so-called "conforming" loans, which are those valued at $417,000 or less. Any loans above that amount are considered "jumbo" loans.
An increase in the conforming loan limit would make it easier and less costly for borrowers in high-cost areas to get loans because Fannie and Freddie would guarantee their purchase by investors.
In the past, the Administration has said it would support a temporary increase in loan limits, but only if lawmakers pass legislation that would boost oversight of both Fannie and Freddie, which have been plagued by accounting scandals.

Best Bosses

Richard CaturanoCompany: Vitale Caturano, BostonStrategy: It's not unusual for employees of accounting firms to spend more time at work than they do at home during tax season. To ease the stress on the 300-member staff of his public accounting firm, president Richard Caturano offers workers free gourmet dinners and Saturday lunches during the busy season.For those who don't have time to fuel up at home, there is a year-round, complimentary breakfast buffet with free espresso. A concierge service handles staffers' errands, such as picking up dry cleaning, laundry drop-offs and visits to the auto shop.And when employees do have spare time, the company makes it easy for them to give back to the community. It provides free or low-cost access to charity events. Perhaps it is not surprising that the company is so generous to its team. It is 100% employee-owned.

Paal GisholtCompany: SmartPak, Plymouth, Mass.Strategy: While many CEOs rely on Monster.com, Paal Gisholt prefers to find employees for SmartPak, a maker of equestrian products, at horse shows and university equine-studies programs.Since he founded the company seven years ago with his wife, Gisholt estimates that he and his HR team have attended 85 horse shows and built relationships with 15 equine-studies programs.Ashley Wener, 22, who received a degree in animal sciences from the University of Vermont, sent her résumé to SmartPak after a professor recommended the company to her. She joined SmartPak in June and now works as a product specialist in the sales department.Her 3.67 GPA helps, she says, but Wener has expanded her knowledge of horses since Gisholt hired her. "I'm constantly learning," she says.Sales at SmartPak grew from $15 million in 2004 to $23 million in 2005, and the company recently expanded into selling prepacked daily helpings of all-natural dog food.Don't be surprised if Gisholt starts scouting for talent at the Westminster Kennel Club Dog Show.

Mellody HobsonCompany: Ariel Capital Management, ChicagoStrategy: Ariel prides itself on its slow and steady approach to investing. The investment firm, which runs three mutual funds and has $17 billion in assets under management, uses the same strategy to advance its social mission: educating African-American kids about investing.Its 97 employees reach out to Chicago children through Ariel Community Academy, a public school that the firm helped the city found and that it supports with help from two financial firms: John Nuveen and Lehman Brothers.Each first-grade class receives $20,000, which Ariel invests equally in its Ariel fund and the Nuveen Rittenhouse Growth fund.Hobson, the company's president, gives regular lectures at the school to both students and their parents on topics such as saving and investing, and she came up with the child-friendly statements that each student receives on the $20,000 investment.Says Hobson: "Ariel Community Academy allows us to attract like-minded employees who have a sense of community."

Graham WestonCompany: Rackspace Managed Hosting, San AntonioWhat's the best way to keep a young company in the fast lane? Weston, co-founder and CEO of Rackspace Managed Hosting, based in San Antonio, hands top performers the keys to one of his cars, a BMW M3 convertible, for a week. Finding creative ways to recognize the stars on his 1,000-employee staff has helped Weston grow annual sales to $139 million at seven-year-old Rackspace, which hosts web applications for other firms."I think it's one of the biggest bargains in business," Weston says. "If you gave somebody a $200 bonus, it wouldn't mean very much. When someone gets to drive my car for a week, they never forget it."For extra recognition, he offers workers the use of a guest house he owns on the Comal River in New Braunfels, Texas, where the water is 72 degrees year round."You know if you work hard, Graham sees it and will take care of you," says David Bryce, 34, vice president of customer care at Rackspace. "You don't have to worry about fighting for yourself to get what's 'due' to you. It's not a lot of fun working for a boss who doesn't give you a raise unless you ask for it."Weston also offers flexible arrangements for employees working through personal problems. When Bryce, who joined Rackspace in 1999, was struggling to cope with a divorce, Weston offered him several months of paid leave, which he gratefully accepted. "I would do anything for Graham," he says.

David WilliamsCompany: Merkle, Lanham, Md.It's just as tough for employees to stay competitive in the marketplace as it is for companies. To help his 850-member staff keep their skills sharp, David Williams, CEO of this database marketing agency, requires them to take classes on subjects such as computer programming, business writing, public speaking, and best practices in their field at the firm's The Merkle Institute of Technology, founded in 1990.Classes are taught by their colleagues, offering lots of opportunities to cross-pollinate ideas with folks in other departments. Classes don't cut into employees' personal time, because they are scheduled during business hours.To make sure the firm's commitment to employee-education is clear, Williams requires each member to earn a certain number of credits and, in some cases, to teach a certain number of hours to be eligible for an annual raise. The firm, which is 80% employee-owned, holds him to the same standard.

How good a boss are you?

After 34 years in the attitude-survey business and thousands of employee polls, David Sirota knows what your subordinates want. Do you? Check this out, then take our quiz.

NEW YORK (Fortune) -- "A large part of what a good boss does is expedite things for employees - that is, help them get their jobs done by removing obstacles. This is not at all the same as 'making sure' they get their jobs done by raising the anxiety level. Most people are anxious enough already." So says David Sirota, head of Sirota Survey Intelligence, a research firm headquartered in Purchase, N.Y., that has surveyed millions of employees in Fortune 500 companies since its founding in 1972.
Along with two co-authors, Sirota has summed up what the firm has discovered in a new book, "The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want" (Wharton School Publishing, $26.95). We recently spoke about how to tell whether you're a good boss or a bad one. Some excerpts from our conversation: To start with the most basic question: What makes a good boss, in employees' eyes?
All of our research consistently shows that people in general have three goals at work. First is fairness. They want to feel that they're being recognized and rewarded fairly for what they contribute. Second is achievement. People want to be proud of the organization and of their place in it. And third, camaraderie, meaning good working relationships and a sense of belonging to a team. If these three goals are met, you have enthusiastic employees.
The trouble is that, in most companies, morale among new hires is high and then, by about the six-month point, it has dropped sharply. Management has destroyed it. One thing bad bosses do is to deliberately make people feel insecure about their jobs. Another is, treat employees like children or criminals instead of like responsible adults.
A sign of a really bad boss is micromanaging, which I define as devoting punitive amounts of attention to minutiae. We've seen workplaces where people have to raise their hands if they want to go to the restroom. Another sign of a bad boss is when you hear employees say that they get no positive feedback at all. A common complaint is, "If we make a mistake, we hear about it, but for doing our jobs well, there is never a 'thank you'."
Just to play devil's advocate for a minute here, let me ask you this: Why should companies care whether employees are enthusiastic or not, as long as the work gets done?
Well, there is plenty of persuasive evidence of a direct link between employee morale and the overall performance of the company, including its stock price. That correlation seems to be a result of enthusiastic employees treating the company's customers particularly well. All of us at one time or another have dealt with an apathetic or even hostile customer-service person or salesperson and, by contrast, with someone who's enthused about his or her work. Enormous difference! A good or a bad direct boss is most often responsible for that.
And it can make or break a company's reputation. We recently did some work with the Mayo Clinic, whose prestige among patients and fellow practitioners comes partly from its employees' enthusiasm. We met nurses there who come in on their days off, just to check on their patients - not because they have to, but because they want to. But it's not just in the life-or-death medical profession that enthusiasm matters. We also worked with Keebler, and there was tremendous dedication and high morale there. People are pleased to be making a product that customers enjoy.
Don't most bosses - even rotten ones - think they are doing the right things? If you are a manager, how can you tell if you're a good boss or a bad one?
The surest way is to ask your people for feedback. How do they think you're doing? This is why 360-degree evaluations are so useful, because they give people the chance to offer you some constructive criticism. If your company has no formal 360-degree program, you have to seek out people's opinions yourself, and you may be glad you did. But you have to be careful how you ask, because people often are afraid to be honest with the boss. So you may need a bit of training in how to open the discussion so that you can actually learn something from it.

Best Bosses

Five leaders who use innovative strategies and rewards to motivate employees.

NEW YORK (Fortune Small Business) -- You can offer all the benefits in the world, but the one that matters most to employees is a piece of the action.
Of the 18 honorees in Winning Workplaces' fourth annual Best Bosses competition, 14 run companies partly or completely worker-owned.
That reflects a broader trend. The National Center for Employee Ownership estimates that 9,225 companies were offering stock-option plans, stock bonus plans, and profit-sharing plans as of July, up from 7,600 in 1999.
How good a boss are you?
Winning Workplaces is a nonprofit in Evanston, Ill., that helps small-business managers improve their communication skills to make workers more productive and happier.
It assembled a team of respected judges, who culled the 80 applicants by looking at factors such as employee satisfaction ratings and by interviewing workers. The result? Eighteen Best Bosses - 17 from commercial companies and one from a nonprofit.
From companies that offer free gourmet dinners during crunch times to a boss who lends top performers the keys to his convertible, see five of the winners and what makes them stand out.