November 5th, 2008
11:00 AM GMT
LONDON, England – It's been the most expensive presidential campaign in history, a grueling slug fest. But as difficult as the campaign has been, it's nothing compared to the challenges of dealing with the economy, the toughest economic challenges facing any president since the 1930s.
A deepening recession, consumer confidence at a record low, rising unemployment, the continued fallout in house prices, massive write-downs by financial institutions, the cost of a massive bail out, not to mention the looming huge health costs for retiring baby boomers.
The reality is that a lot of priorities and promises such as health care reform are likely to be pushed to the back at least for now.
The number one priority for the Obama administration will be dealing with the deepening recession. A second government stimulus package will be pushed out quickly. It won't turn the economy around, but it will send the right signal.
But the challenges of spending their way out of recession are compounded by the huge deficit that the new administration will inherit.
The deficit for fiscal 2008 which ended in September was $455 billion or 3.2 percent of GDP. Analysts say it could be a trillion dollars for the current fiscal year or more than 7 percent of GDP.
But like so much else in this financial crisis, the immediate goal is getting the financial system and economy back on track; deficit reduction will have to wait.
Bill Clinton realized early in his administration he couldn't afford to fulfill some of his campaign promises and that fiscal restraint was more important. It was an act of political courage, and when he left office, the Bush administration inherited a budget surplus.
George W. Bush pushed through tax cuts, Medicare prescription drug benefits and entered into a war on two fronts, and the cost has been enormous. During his administration the national debt has nearly doubled to more than ten trillion dollars. President Bush is leaving the new administration a country that is in a weakened position fiscally.
A lot of hopes are riding on Barack Obama. Not only will his leadership be tested in getting the country through its current economic crisis, but once times get better, it will be tested again in making fiscal discipline a priority.
His economic legacy, and the country's, is riding on both.
As always I welcome your thoughts. Are expectations too high in terms of what the new president can accomplish?
Will it be possible to make good on campaign promises and still leave a fiscally responsible legacy?
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