President-Elect Obama to Face Many Economic Challenges

Gerri L. Elder

During the 2008 presidential race, John McCain and Barack Obama each laid out their own plans for fixing the U.S. economy. Both candidates knew it would not be an easy task, as the next president will inherit a deep economic recession that has been compared to the Great Depression.

Obama will not enjoy any downtime when he takes office in January. He will have to get to work right away in order to take on the tasks of restoring consumer confidence and reversing the recession while attempting to reduce the rising unemployment rate. It will be time to throw his plans for change into full-throttle.

According to a MarketWatch report, the day after the presidential election, U.S. markets tanked and world markets remain mixed. It seems that investors may remain uneasy until Obama makes some important choices about his administration.

The election increased the Democratic majorities in Congress. Now businesses around the world brace themselves for stronger oversight and regulation of the financial sector and a tax structure that is less favorable for big business.

Economic Stimulus Part II

There may be another stimulus package on the way even before Obama takes office. If not, experts believe that the Obama administration will push hard for another round of economic stimulation.

With a growing budget deficit, no one is exactly sure how Congress would pay for a second stimulus package. A new stimulus bill would be expected to address a variety of policy actions, rather than simply providing direct tax rebate checks to consumers.

ABC News reported that a new stimulus package could include extensions of unemployment benefits and food stamps, funding to create new jobs, money to state governments to help cover rising Medicaid costs, and mortgage relief assistance for struggling homeowners who may be facing foreclosure and bankruptcy.

A second stimulus package might also include tax cuts or another round of tax rebate checks, and perhaps an extension of existing tax rates too. Money could also be provided to help people pay their rising heating bills this winter.

Foreclosure Assistance

Since the collapse of the housing market, more and more Americans owe more on their homes than they are worth and have no equity left. The nationwide foreclosure crisis is showing no signs of letting up and is devastating neighborhoods coast to coast. Obama pledged to help homeowners hang onto their homes during his campaign.

The president-elect proposed a rescue plan for the housing crisis that includes a 90-day moratorium on foreclosures. Not only would this give some homeowners a chance to catch up on missed mortgage payments, it would also give the government time to work on a plan for rewriting the terms of unaffordable mortgages for qualified homeowners.

Unemployment Benefits

Mass layoffs are now commonplace in the United States and are contributing to the rising unemployment rate. Obama said that he would extend unemployment benefits and make the benefits non-taxable. He also favors temporarily lowering or suspending the tax penalties on hardship withdrawals from 401(k) and IRA accounts.

Tax Promises

Obama vowed to keep the Bush tax cuts for middle-income people earning less than $250,000 per year in place and expand tax credits for low-income families. He also said that he would 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.

Will We See the “Change” As Promised?

In order to implement the changes that Obama so frequently promised during his campaign, he will have to start working very hard as soon as he moves into the White House. He will face additional economic challenges with the Social Security system as baby boomers get set to retire.