Obama's to-do list can't wait

After a hard-fought campaign, the president must turn immediately to the fiscal cliff and the nation's debt limit. Already, a credit-rating agency is warning of a possible downgrade.

By Anthony Mirhaydari Nov 7, 2012 11:30AM

Image: American Eagle © Steve Allen, Brandx Pictures, PhotolibraryIn the wake of the bare-knuckled brawl with GOP contender Mitt Romney, President Barack Obama's emotions likely ran from aching exhaustion to ebullience and excitement last night as he took the stage with his family to celebrate his re-election.

 

But soon after, no doubt, a creeping worry set in as he took stock of what lies ahead. While he won't have to win the approval of voters again, if he wants to protect his legacy, Obama must get to work. Fast.

 

While he's no rookie when it comes to facing tough choices as a just-elected president -- he faced a financial crisis and economic catastrophe when inaugurated back in January 2009 -- the current list of fiscal and foreign-policy needs is nothing to sneeze at.

 

On the overseas front, he faces the rise of terrorism in Africa, Iran vs. Israel, Iran's growing influence in Iraq, the Taliban resurgent in Afghanistan via Pakistan, Iran's nuclear ambitions, China's increasing power and growing military might, Russia's growing assertiveness, the Eurozone crisis, territorial battles in the Pacific over the various island groups, and the ongoing drug war in Mexico.

 

Here at home, the problems are more immediate and will require compromise with the House of Representatives, which America has once again given to the Republicans. While the country said it's tired of the gridlock in Washington, and watched in horror as politicians torpedoed the economy and the financial markets in the summer of 2011 over the debt-ceiling battle, they also reelected the status quo.

 

This time, status quo won't be good enough.  Here's what's on the to-do list.

 

The fiscal cliff and debt ceiling

Job one is addressing the fiscal cliff of tax hikes and spending cuts worth some 5% of GDP set to hit on Jan. 1. Also, the U.S. Treasury is quickly moving towards its $16.4 trillion debt ceiling. This challenge, which I wrote about in "How to avoid the fiscal cliff," is the focus of Wall Street's attention. Expectations are that Obama and the Republicans cobble together a smaller, $300 billion deficit package worth around 2% of GDP.

 

But even this will require tough choices on issues like payroll tax cuts, extended unemployment benefits and the Bush tax cuts. Failure to act, or to dig up a big-minded, structural solution like the one proposed by the Simpson-Bowles deficit commission, would rattle markets and once again threaten America's credit rating. As I've said before, the real long-term deficit problem is tied to an overpriced and inefficient health care system.

 

Wasting no time, the analysts at Fitch have already warned that Obama will get no fiscal honeymoon as he faces a 2013 credit downgrade if the fiscal cliff isn't avoided. And failure to act on the debt ceiling, which they believe will be hit in early 2013, would undermine confidence in the United States as a reliable borrower and thus its "AAA" status. (Standard & Poor's cut our AAA rating last summer.)

 

CEOs' lack of confidence

My immediate reaction to last night's result was "Will Atlas shrug?" -- alluding to the recent drop in CEO confidence and the slashing of hiring intentions and capital expenditures by executives. If those in the corner office fear more regulation, more taxation and more market-shaking fiscal chaos, they may very well continue to pull back. This, as Ayn Rand warned, could suck the wind out of the sails of the economy at a time when GDP growth is struggling to stay at 2% despite massive and increasingly inflationary monetary policy support.

 

I'll be watching measures of CEO confidence as well as capital spending closely.

 

The jobs deficit

While Obama and Romney touted dueling gauges of the job market (Romney taking about the jobs deficit, Obama talking about string of monthly job creation) the fact remains that there are still far too many people out of work. We are 6.4 million full-time jobs below where we were in late 2007 before the recession hit; despite an 11 million increase in the population over that period.

 

So to get the employment to population ratio back to its pre-recession level, we need to create 17.4 million jobs.

 

At the current rate of monthly job creation, we'll never get there. Year-to-date, we're creating 169,000 jobs per month on average, while the population is growing an average of 190,000 per month.

 

Stagnant wages

The final problem Obama must address is the stagnation of middle-class wages. You see, many of the jobs created over the last few months have been part-time, low-wage, no-benefit positions. And those with full-time positions are seeing employers increase their benefit contributions, not their take home pay. Until workers see a real, meaningful increase in their paychecks, the economy will continue to struggle.

 

Last month, the annual growth rate of average hourly earnings for non-supervisory employees fell to just 1.1% -- a record low. Adding to the problem is that inflation is pushing higher again, which will result in a higher cost of living for families.

 

If President Obama wants to improve his favorability and approval ratings, he needs to extend a hand across the aisle and find a way to cobble together a solution to these problems with the Republicans in Congress.  A repeat of the political blood feud we've seen over the last two years, between the Tea Party Republicans in Congress and Obama's White House would be a nightmare.

 

You know, in retrospect, maybe Mitt Romney should've been the one celebrating last night.

 

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


 

221Comments
Nov 7, 2012 1:11PM
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Oh well - we had a good country while it lasted - the best.  Now we’ve transformed from a country of energetic innovators to an entitlement state.  Entitlements with no innovation (and thus no revenue to pay for them) equals economic catastrophe.  Next up on the innovation stage = China. 

 

But you really can't blame those who are receiving the entitlements for voting for the cash cow in Obama.  They can either go broke now (in their mind) or go broke years down the road when our nation goes broke.  I blame the enablers embodied in the democratic party, who is willing to sacrifice the future of our country to get elected.  The only hope for those on entitlements and our nation long-term was to put a pro-growth president in the White House.  Because that didn't happen, America's decline is cemented.

Nov 7, 2012 1:10PM
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Should have been talking about this before the election.
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Expect a continued downturn of the market, increase unemployment growth as the real numbers surface, 10-15% tax increase for individuals and businesses, healthcare cost exploding and a record number of expensivie parties, vacations, and if my guess is corrrect Obozo will have an all-star legends game at tax payer expense.
Nov 7, 2012 1:04PM
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So when is Ted Nugent going to check himself in to jail?
Nov 7, 2012 1:03PM
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obama top to do list is take your guns and silver then take away all your freedoms when dollar bubble pops.  now the shadow government in full control.  only great Christian awakening save us now.  sad day America, you voted for stuff and not freedom. America has voted for tyranny. this how freedom dies.
Nov 7, 2012 1:03PM
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Where was this article during the election?
Nov 7, 2012 1:00PM
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Smart Money has left the House !  TAKE YOUR MONEY AND RUN !
Nov 7, 2012 12:57PM
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This is no surprise.  Was there a possible way to win the "electoral college"...nope.  You have the same "minorities" doing the same. You have now even more that will be on "welfare" as they do not have to work and will not.  Keep the "check" coming until....whoops.    You all know where this coming from and you can simply look at the "real" demographics. This was easy to call and all the analyzing was just BS.  We are a nation in disgrace and have forgotten any principle of what we were, once. It is not reversible and will not be.  You asked for ir...America" and you got it.
Nov 7, 2012 12:54PM
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All I have seen, witnessed too in the criminal system today is just that. Lies, deceptions and greedy men, wicked men that have turned this society into their blind minions through their greed, lies and deceptions. So I tell you this as I read about what I have witnessed in this election deception and this is also for the evil men. 

He that speaks the truth shows righteousness, but these false witnesses are only their to deceive. They speak with deceiving tongues, a sword that even cuts the innocent. The tong of wise men who listen is health. The lips of truth shall be established soon, but their lying tongue is only for that moment. Deceit is in the hearts of them that imagine all kind of evil, but the counselors of peace is joy, which see warmongers. There shall no evil in these days come upon the just, But these wicked men shall be filled with their own mischief. Their lying lips are an O-Abomination to the Lord and this country. The hearts of all these foolish puppets, have proclaimed their foolishness, the way of these wicked men, this criminal government seduced them, the souls of these transgressors shall eat violence. He that has opened his mouth in lies shall also reap destruction and will come to his own shame...Amen
Nov 7, 2012 12:47PM
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Well it now looks like we will have more free loaders and less producers.
Nov 7, 2012 12:46PM
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The stock markets is an over inflated pig anyway.......since 2009 ! 

Raise interest rates !  

Nov 7, 2012 12:46PM
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Poor MITT WITTs your man was a dud to start with.. get over it
Nov 7, 2012 12:43PM
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At least we are not ( maybe ? ) looking at a " more powerful military " as Romney wanted !  Thats  what sunk this country in the first place ! 
Nov 7, 2012 12:42PM
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It looks like investors are showing their wrath today and pounding the market ...wow...
Nov 7, 2012 12:42PM
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Who will Obama blame now for his continued failures?  Wall Street doesn't seem to have much confidence in his ability to turn it around.  350 down and still dropping. 

Nov 7, 2012 12:35PM
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From Anthony's article:  "On the overseas front, he faces the rise of terrorism in Africa, Iran vs. Israel, Iran's growing influence in Iraq, the Taliban resurgent in Afghanistan via Pakistan, Iran's nuclear ambitions..."

 

In his book, he says "He will be on the side of the Muslims".    That is his solution.  Let them do as they wish.

Nov 7, 2012 12:34PM
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Hey Anthony, take a look at the market today. All indicators are down and significantly down. The street sent a message on Tuesday as to whom they wanted in the White House--they wanted a businessman who knows how to stimulate the economy, not more of the same four years of triple spending and bigger deficits. Extending a hand across the table to the congress won't do it. Obama needs to take steps to cut spending, and stimulate the economy to create jobs. Unemployment will continue under this guy. He is clueless.
Nov 7, 2012 12:33PM
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Obummer's to do list...

 

Divide and Conquer..the division is now completed, as you can see by the comments on most sites, now for the conquer...the conquer will be completed by debt.

Nov 7, 2012 12:32PM
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Lets see if republicans in the house can solve the nations problems now? Once more idiots in America read your constitution and see that CONGRESS tax and spends not POTUS. If they don't we have mid term elections for the house in 2 yrs . The backlash from the party of no may sink the republicans for good in the house.
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