Economy the single most important issue on agenda
Here's the assignment President Barack Obama has won with his re-election: Improve an economy burdened by high unemployment, stagnant pay, a European financial crisis, slowing global growth and US companies still too anxious to expand much.india Updated: Nov 08, 2012 15:05 IST
Here's the assignment President Barack Obama has won with his re-election: Improve an economy burdened by high unemployment, stagnant pay, a European financial crisis, slowing global growth and US companies still too anxious to expand much.
The economy risks sinking into another recession if Congress can't reach a budget deal to avert tax increases and deep spending cuts of about $1.2 trillion starting in January.
The US economy will fall over a "fiscal cliff" without a budget deal by year's end. Spending cuts and tax increases will start to kick in. The combination of those measures would likely trigger a recession and drive unemployment up to 9% next year, according to estimates by the Congressional Budget Office.
Many US employers are wary of expanding or hiring until that potential crisis is averted. That's why analysts have said resolving, or at least delaying, the fiscal cliff should be the most urgent economic priority for the White House.
Obama has said he would help create jobs by preserving low income tax rates for all except high-income Americans, spending more on public works and giving targeted tax breaks to businesses.
He used his victory speech to promise action in the coming months to reduce the government's budget deficit, overhaul the tax system and reform immigration laws.
The jobs picture has been improving gradually. Employers added a solid 171,000 jobs in October. Hiring was also stronger in August and September than first thought.
That said, most economists predict the improvement will remain steady but slow. The unemployment rate is 7.9%. Few think the rate will return to a normal level of 6% within the next two years. The Federal Reserve expects unemployment to be 7.6% or higher throughout 2013.
Economists surveyed last month said they expected the economy to grow a lackluster 2.3% next year, too slight to generate strong job growth. From July through September, the economy grew at a 2% annual rate.
Part of the reason is that much of Europe has sunk into recession. Leaders there are struggling to defuse a debt crisis and save the euro currency. Europe buys 22% of America's exports, and US companies have invested heavily there. Any slowdown in Europe dents US exports and corporate profits.