Economic Challenges for Obama
The presidential candidates campaigned hard for the 2008 election, each knowing that the winner would have to immediately take on the monumental task of digging the U.S. economy out of a deep recession.
President-elect Barack Obama will have to act quickly upon taking office to restore consumer confidence, reverse the sinking economy, attempt to stop the nationwide foreclosure crisis and reduce the rising unemployment rate caused by mass layoffs and business bankruptcies. It's a tall order, but the public seems hopeful that Obama can deliver the "change" that he promised so often during his campaign speeches.
MarketWatch reported that the day following the presidential election, U.S. markets dipped sharply lower and world markets were mixed. Investors around the world seem to be watching and waiting for Obama to make some important decisions.
Since the election increased the Democratic majorities in both the House and Senate, businesses across the globe are preparing for the impact of a strongly Democratic Washington. With Democrats at the helm, there will likely be stronger oversight and regulation of the financial sector, with a tax structure that is less friendly than companies have enjoyed under the Bush administration. All eyes are now on the choices Obama must now make in choosing his cabinet.
Another Stimulus Package
There is speculation that the Obama administration will push for a large economic stimulus package. However, with a growing budget deficit, it is unclear as to how Congress could choreograph a meaningful stimulus package. A second stimulus bill would be expected to address a variety of policy actions, rather than simply providing direct tax rebate checks to consumers.
According to an ABC News report, a new stimulus bill could include extensions of unemployment benefits and food stamps, funding for state and local infrastructure projects to create new jobs, money to cover rising Medicaid costs to help state governments, and mortgage relief assistance for struggling homeowners so that they may avoid foreclosure and filing bankruptcy.
A second stimulus package might mean tax cuts or another round of tax rebate checks, or possibly an extension of existing tax rates too. It could also provide money to help citizens pay their rising heating costs this winter.
Help for Homeowners
With one in six homeowners now "upside down" in their mortgages, meaning that they owe more than their homes are worth, the foreclosure crisis is likely to continue. When Obama takes office, helping homeowners keep their homes will be a priority.
Obama has proposed a rescue plan for the housing crisis that includes a 90-day moratorium on mortgage foreclosures. This could give many distressed homeowners the time to catch up on missed loan payments. It would also give the government an opportunity to develop a systematic plan for rewriting the terms of unaffordable mortgages for qualified homeowners.
The president-elect also wants to give bankruptcy judges the power to lower mortgage payments in order to keep families in their homes, although this is strongly opposed by the mortgage industry.
Unemployment Crisis
As the economy grinds to a halt and consumers tighten their belts, mass layoffs are commonplace and the unemployment rate is rising. Obama has said that he will extend unemployment benefits and eliminate taxes on the benefits. He also is in favor of temporarily lowering or suspending the tax penalties on hardship withdrawals from retirement accounts.
Obama on Taxes
During his campaign, Obama said that he will keep the Bush tax cuts for middle-income people earning less than $250,000 per year and expand tax credits for low-income families. He would also like to eliminate income taxes for senior citizens who earn less than $50,000 per year, encourage job creation and eliminate capital gains tax on small businesses and startups.
Much Change is Necessary
Obama will have to work hard to implement the changes that he has promised. In addition to the task of turning the economy around and helping Americans get back on their feet, the issue of Social Security looms like a black cloud as baby boomers get set to retire.
The world watches and waits to see if Obama can make good on his campaign promises and swiftly jump start the failing U.S. economy.