Obama’s Top Eight Post-Election Economic Issues
(NEW YORK) -- Now that the anticipation of the presidential election is behind investors' minds, the next hurdle of uncertainty is the fiscal cliff and Europe.
Stocks are reaching lows not reached in months. The forecast for the European economy is gloomy, and Americans are anticipating gridlock over impending tax increases and spending cuts.
President Obama said in his acceptance speech, "And in the coming weeks and months I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together -- reducing our deficit, reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil."
"The fact that we can't nail down precisely what's going to happen -- if there's one thing that the market hates, it's uncertainty," said Paul Larson, chief equities strategist with investment firm Morningstar. "And now we have a whole lot of uncertainty about how the politicians plan on tackling this problem."
Here are the country's eight biggest post-election economic issues:
The president did not mention Europe in his acceptance speech, nor was the Eurozone a major topic during the campaign. But the Eurozone's $17 trillion economy is not easy to ignore. Protests turned violent in Athens in their second day as Greek Prime Minister Antonis Samaras was seeking approval from parliament on Wednesday for austerity measures to receive needed aid. Meanwhile, European Central Bank president Mario Draghi said the Eurozone crisis was weighing on Germany's economy.
"The good news is that the Affordable Care Act set change in motion and that momentum is not going away," said Tracy Watts, partner with consulting firm Mercer. She said she is seeing slower cost increases as a result of reform, which moves employers to make bold changes in health care. However, employers are anxiously awaiting guidance about what rules will look like for 2014.
3. Payroll Taxes
Scott Brown, chief economist at Raymond James, said the fiscal cliff isn't necessarily a cliff. "The economy won't grind to a halt on January 1," he said. However, it is possible the average American will lose some money in their pockets as the government deals with its budget deficit. In particular, the payroll tax is scheduled to return to 6.2 percent in January from 4.2 percent. Brown said a deal is unlikely by the end of the year.
4. Bush Tax Cuts
Along with an increase in payroll taxes, tax cuts for higher earners from George W. Bush's administration are also set to expire by year's end. As Obama has staunchly campaigned for the middle class, he has insisted on raising tax rates for the highest earners.
5. Unemployment Benefits
Obama also did not mention unemployment benefits for the 12.3 million unemployed people in the country despite the upcoming expiration of emergency unemployment benefits at year's end, which will likely affect some of the most vulnerable Americans. The Congressional Budget Office said the expiration of the extended emergency unemployment benefits through the Middle Class Tax Relief and Job Creation Act of 2012 will lower spending by $26 billion in fiscal year 2013. However, the president did mention job programs for veterans in his speech Tuesday night.
6. Spending Cuts
Some of the sectors anticipating spending cuts saw decreases in their stock prices the day after the election, including the defense sector. "A lot of the sectors that were hoping for a Romney win are kind of getting beaten up a little bit today," said Larson. "A Democratic presidency is seen to be less friendly to overall defense spending than Republicans, which are a little bit more hawkish."
7. Green Energy
The president took heat during the campaign for his support of Solyndra, a solar energy company that received government stimulus funds and ultimately failed. Gov. Mitt Romney repeatedly criticized the administration's decision to intervene instead of allowing market forces to act accordingly. While Obama may not be jumping up to support specific companies immediately, he was not shy to address the environment in his acceptance speech. "We want our children to live in an America that isn't burdened by debt, that isn't weakened by inequality. That isn't weakened by the destructive power of a warming planet," he said, adding that he would work "freeing ourselves from foreign oil." All businesses, not just the green energy industry, will be watching the administration's next moves regarding climate change, whether it's in the form of regulations, penalties or tax breaks.
8. The Next Federal Reserve Chairman
While U.S. stocks are down, the bigger reaction initially were bonds. Brown said that may be in part to the expectation that Obama will now choose Federal Chairman Ben Bernanke's successor once his term ends in Jan. 2014.
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