10/15/2012 11:15 PM ET|
5 economic tests for president-elect
After a long and hard-fought presidential campaign, the winner won't get to celebrate for long. Some serious challenges loom.
It's time to look ahead. What sort of agenda will the winner inherit? How will he deal with a bitterly divided and partisan political system, a weak recovery and a raft of pressing crises at home and abroad?
Here's what the email from his chief economic adviser might look like on Nov. 7:
Dear Mr. President/President-elect,
Congratulations on your victory. I'm sorry to butt in on your celebrations, but you asked for a summary of the economic problems ahead. I'm afraid you face five major ones.
1. The fiscal cliff
On Dec. 31 the U.S. federal government is going to hit a potentially disastrous so-called fiscal cliff. Under current law, taxes are set to jump and spending will be cut. This is partly due to the planned expiration of the Bush-era and other tax cuts and partly to spending cuts agreed to last year.
This must not be allowed to happen. The International Monetary Fund, the Congressional Budget Office and most economists agree that the net effect of this sharp budget tightening, at a time when the economy is weak, could tip the U.S. economy back into recession.
Middle-class taxpayers would see a big jump in tax bills. Andrew Smithers, a financial consultant in London who called the last two financial crises, suspects it could also tank the stock market.
Yet something must be done. Clearly, $1 trillion-plus budget deficits cannot go on indefinitely. And Congress is likely to demand some form of deal as the price for approving yet another increase to the debt ceiling early next year. We need that agreement, or you will be the first president in history to default on Treasury bonds.
According to the Labor Department, about 15% of the workforce, or one worker in seven, is either unemployed or stuck working part time because he or she can't get full-time work. And 23% of prime working-age men -- about 14 million ages 25 to 54 -- lack a full-time job. Think about the lost output in the economy -- and lost taxes to the government.
This has been a recession like no other since World War II. Yes, the U.S. has recovered faster than many of our overseas competitors. And, yes, the private sector has been hiring at a reasonable clip lately -- about 145,000 new jobs a month so far this year.
Over the last four years, the U.S. government has thrown billions and billions of borrowed money, and billions more of printed money, at the economy. Yet according to a recent study by the Associated Press, this has been the weakest recovery since the war.
The public has just elected you to sustain a jobs recovery in these circumstances. And the public is looking for you to bring the estimated 5 million long-term unemployed back into the economy.
If you think the jobs crisis is bad, look at the looming retirement crisis.
Social Security and Medicare, most agree, are on unsustainable fiscal ground. Taxes will have to be raised, and spending reined in, to ensure the systems stay solvent. This is a major item on your to-do list.
But here's the problem. There's only so much you can cut, because 80 million baby boomers are starting to retire -- and very few of them are prepared. According to the latest survey by the Employee Benefit Research Institute, an independent think tank, "a sizable percentage of workers have virtually no money in savings and investments."
Sixty percent of all workers surveyed have less than $25,000 in savings and investments, and 30% have less than $1,000. The figures for boomers -- those over 45 -- are better, but not by a lot.
To put this in context, $25,000 will buy a retired couple an annuity of only about $118 a month. Add that to an average Social Security check of $1,230 a month, and you are potentially looking at mass poverty among the elderly.
More from The Wall Street Journal:
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Report just came out about how public pensions are $1.2 Trillion short. Where did the money go Obama?
We need a balanced approach - cut spending AND raise taxes.
Go away Grover No r qui st.
To All Of My Fellow Americans!
We are not going to get away from ourselves ,which is saying no idiot can tell you there is a light at the end of the tunnel. We have to have either a wwIII or we need for the secrets of (LITHIUM) that would start the NEW industrial age again.
The new electronic age has really put people out of work because electronics has replaced man with modern know how . The car of tomorrow will be all lithium based as our homes and the do-it-themselves are going to have better equipment.
WE are going to make some nasty decisions about taxes ,but if we found the magic that would put hundreds of thousands back to work ,the extra workers will bring more tax money in . We should empower the YOUNG PEOPLE right now to stretch their minds far into the outer limits . Pay them well and colleges need money to help the next generations of gate keeprs of our future.
No president needs to be giving away good money for bad causes.or ideas. WE should put scholars to work the brain trust of this great nation to start to work with the young and eager to go forward .
Is THERE ANYONE OUT THERE THAT WILL LISTEN TO THIS 124 IQ ON HOW TO MAKE US A NATION AGAIN THE VERY BEST IN SOLVING WHAT WE NEED TO HELP ALL OF MAN KIND, STARTING WITH AMERICA .
As an employer that signs paychecks every Thursday, I can tell you that my fellow Americans are lazy. Our foreign visitors in this country work very long and hard, we do not.
The promised entitlements were lies, they can not be paid. This is the fault of the man in the mirror. We get the government and leaders we deserve.
Do not blame Banks, or the 1%. Today's middle class is not my Grandfather's middle class.
After reading this article I sure hope Obama gets a second term.Romney would throw most
of us under the bus.It would be goodbye to SS,medicare,etc,etc.
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