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 3:57PM
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the market drop is a reaction to Obama's victory plain and simple- he had 4 years and did nothing welcome to our nightmare- time for America to boycott all George Clooney movies/ Jay Z and Beyonce songs and to throw The Boss back in the bar the dragged him out of- at least boycott the movies- lets start wearing t-shirts that say Obama Won- America Lost
Nov 7, 2012 3:56PM
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" if he wants to protect his legacy, Obama must get to work. Fast."

I would think he would want to change it, not protect it.......
Nov 7, 2012 3:52PM
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Now you write this?? This is what the GOP has been saying for 3 years!

A couple months late you GOON! 
Nov 7, 2012 3:41PM
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Well, maybe the right will decide to act like their job is to goven, not just obstruct - and surprise the world by acting like responsible elected officials instead of special interest-beholden step and fetches.

 

That shock alone would send the DOW over the moon. I can see it now on the front of the FT: Republicans Cooperate! The Republic Rejoices!

Nov 7, 2012 3:38PM
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Memo to all the sad white men who are terrified their days are numbered: WAKE UP.  Your candidate was a Brylcreemed Ken doll without an original idea in his head, leading a party that has been hijacked by lunatics.  Until you can get your own house in order -- you can start by avoiding wackos who think that rape is a legitimate form of conception! -- stop blaming everyone else for your failure.  Mitt Romney lied every time he opened his mouth during the entire campaign.  Maybe you should focus on that?  Maybe focus on the fact that the majority of people aren't as stupid as you'd like to believe and they KNEW they were being lied to?  The GOP used to be a party that had great thinkers and innovative plans but now they're a bunch of dinosaurs whose only response to everything is to blame somebody else!!!  Obama's not perfect, certainly, but his heart's in the right place.  Do you really believe that seeing John Boehner spout the same old bs the morning after the election is really the way we're going to solve the problems we're facing??  If so you're not just pathetic, you're stupid as well.
Nov 7, 2012 3:19PM
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The smart money is leaving the market.  They know Obama is bad for business and gridlock will likely continue in Congress.  Very depressing.  I spoke with several CEOs and CFOs before the election and they were holding off on decisions to expand until they saw who won the election. Can America handle four more years of Obamanomics?   We had a chance with Romney to turn this economy around, but what now?
Nov 7, 2012 2:46PM
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  They drank the koolaide... .......and after 8 years it will still be George Bush's fault......!
Nov 7, 2012 2:39PM
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3 Quotes from Thomas Jefferson Father of the Democratic Party:

 

*The democracy will cease to exist when you take away from those who are willing to work and give to those who would not. -Thomas Jefferson

 

*Most bad government has grown out of too much government. -Thomas Jefferson

 

*Where we are directed from Washington; when to sow and when

to reap, we should soon want bread. -Thomas Jefferson

 

Hell, Thomas J. sounds like a Republican. I think the Democrats have lost their roots.

Nov 7, 2012 2:12PM
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Well voters of Obama, you wanted it and now you have it!  When insurance plans go up for middle class folks like my family to provide insurance for those without, sad.  What is so amazing is that people are blind.  When your paycheck gets cut to provide insurance for those who don't have it, the O voter will say, "oh, I didn't know this was going to happen."  When we sink into a major depression again, when women abort babies at 6 months, when Israel hates the U.S., when we have to hide our bibles, when we start taking microchips in our bodies, when our children will not be here to have their own children, when Iran bombs Israel, when we are standing in the bread line, when O can't blame anyone else but himself for what is happening to what once was the greatest nation on earth, when government tells you what, when, how, and where you will do it or you will die, WE WILL ALL LOOK AROUND AND WON'T BE ABLE TO FIND ONE SACK OF S**T WHO VOTED FOR HIM!  God have mercy on the U.S.!!!  He is a wretched, sick, Godless individual.  I will never bow down to another God!  I will die in the name of mine!  Four more years to put socialism into place.  This is definitely the end for us.  Thank you, the young, illegal, immoral, satanic voters who put him back.  I can't wait until you get what you deserve!!!
Nov 7, 2012 2:02PM
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After wasting the last two years campaigning instead of leading, Obama needs to get with it. If he plays the same old tune of divide and conquer we're all going to suffer. It's safe to say without a workable energy plan our debt will continue to skyrocket. If that's the path we're going down we can expect economic calamity.
Nov 7, 2012 1:57PM
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Hard to believe after 4 yrs of higher gas us apolyizing to muslim counties that people would want 4 more yrs of failure. This president needs to work with the congress for the best for this country not for  there parties.
Nov 7, 2012 1:56PM
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What can you say at this point (post-Election), except: HAAAAAAAAAAAA, HaHaHaHaHaHa!!!  All you Romney wanna be fascist racist clones!  You lost!  Eat that!!
Nov 7, 2012 1:56PM
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Obama HAS extended his hand across the isle and compromised, for the past four years. It's the Republican House which hasn't. I guess "extending his hand across the isle" must must mean he agrees and submits to EVERTHING they want, or they become petulant and twist things around saying HE doesn't compromise or it's "his way or the highway." More of their ongoing game of putting the opposite spin on things and repeating it enough to get as many people as possible to buy it.
Nov 7, 2012 1:43PM
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Ron Paul told the "truth" and was routed.   Mitt Romney tried to go to the center and nearly lost the primary to those too far to the right to command a majority in a general election.   Mitt's attempt to get back to a "center" was too little too late as Obama's press machine painted Romney the party of the rich and out-of-touch.   Divide the minority and the majority.  Divide the rich and the poor.  Obama should be ashamed of the tactics he used, but he was "smarter" than the republicans who should have had no problem winning this election if it were not for their petty bickering amongst themselves.

 

Yes, I think we're doomed to a credit downgrade, recession, job loss, stock market major pullback and more.  If the Repubs can't pull it together and be more inclusive, then these liberal liars will continue to run us into bankrupcy (can you even imagine President Biden????).  

 

I do not think that telling the truth is so bad.  Maybe the R's can get their act together and stop pretending they can give us $2.00/gallon gas and instead tell us how much it is going to cost to fix an entitlement system that is out of control.   Particularly when the aging population believes (becasue they were lied to) that it is their money and not an entitlement.

Nov 7, 2012 1:36PM
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I told you the stock market would tank with Obama's re-election!!! I'm sure glad I pulled my money from the market a couple weeks ago and planted it in the Cook Islands with the rest of my money. Just watch how the stock market will dive as the folks with money will all be pulling their money from the market. That is how the market tanks. The last laugh will be on the "entitled" folks since there won't be enough money to pay all the "entitlement" programs. I wonder how many people that were paying all the taxes right now, won't be paying any taxes 2 years from now. Instead they will have their money in another, more stable country.Good luck and I hope Obama will do better in his 2nd term. I have kids and nieces and nephews whose lives he holds in his hands.
Nov 7, 2012 1:35PM
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Some states seem to have the right idea...Legalize Pot so we can keep the people numb and oblivious about what Obama is doing to us.  Will there soon be a Federal Program designed to provide Pot for those who can't afford it? 

Nov 7, 2012 1:34PM
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Very good article - but Obama is clueless - how ironic a LOSER won the election!!
Nov 7, 2012 1:30PM
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There is no mandate when half the population doesn't agree with the Presidents initiatives. For those whose candidate lost; quit grumbling and find better candidates. For those whose candidate won; quit gloating, be respectful to the losing half (because you will need their help) and get to work  accomplishing something, instead of always blaming your failures on someone else!!!
Nov 7, 2012 1:24PM
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It is not the president or congress conservatives or liberals democrats or republicans. It is the american people, they have a hard hard lesson to learn "socialism doesn't work" however, socialism has its own solution - bankruptcy. What America has done with reelection of Obama is guarantee that bankruptcy. ,Bankruptcy does some real good things. It removes outdated ideas and bad managements, it reevaluate assets, it gets the crap out of the heads of the lenders and may bankrupt them too. In other words it cleans things up so we can start again. This election has defined my economic plan - I'm going to  be ready to start again.
Nov 7, 2012 1:21PM
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