Now that President Barack Obama has won the contentious presidential election, it’s time to look at what analysts, economists, financial experts and even government agencies are saying about his second term plans to address the crucial issues facing the United States.
A lot of pundits would agree that the president did not really lay out his agenda for the next four years during the campaign trail. Since many consider his first term rather unsuccessful – wars still being fought, the national debt increasing and four trillion-dollar-plus budget deficits – there are aspects that are worrying those who are concerned about the state of the nation’s fiscal structure.
Here is a look at the country’s four major issues and how an Obama second term may exacerbate these problems: national debt, budget deficit, economy and taxes.
Published data from the White House Office of Management and Budget suggested the national debt will rise from $16.2 trillion (the number at the time of this writing) to $20.3 trillion by the end of the president’s second term.
The “Mid-Session Review” report tackles changed approximations of various receipts, outlays, budget authority and the budget deficit between the fiscal years of 2012 and 2022. It projects these national debt figures each year: $17.3 trillion by the end of 2013, $18.4 trillion by the end of 2014, $19.4 trillion by the end of 2015 and $20.3 trillion by the end of 2016.
(Be sure to take a look at our recent blog post that looks at 10 facts about the U.S. debt.)
President Obama’s second term may not focus on the national debt, at least according to a recent interview with David Letterman, where he noted that the nation doesn’t have to worry about the debt “in the short term.” He even claimed that he is only responsible for about $526 billion on the increase in the national debt, which has been debunked by the Washington Post.
A U.S. News & World Report reported a statement put forward by a group of economists, such as Nobel laureates Gary Becker, Robert Lucas, Robert Mundell, Edward Prescott and Myron Scholes, which supported Republican nominee Mitt Romney’s plan because it was “based on proven principles.
“We enthusiastically endorse Governor Mitt Romney’s economic plan to create jobs and restore economic growth while returning America to its tradition of economic freedom,” the economists wrote in the statement.
The men urged the restructuring of marginal tax rates, ending the federal debt, restructuring regulations, improving Social Security and Medicare by reducing their growth, reforming the healthcare system to a more free market approach and promoting domestic energy policies.
In the end, the economists argued that the president’s second term agenda of “interventions” is rather inferior to his former GOP challenger.
The U.S. budget deficit presently stands at $1.1 trillion. Although the budget deficits have been lower since the president took office, Congressional Budget Office (CBO) estimates present trillion-dollar-plus deficits again starting in either 2017 or 2018.
By the end of next year, the CBO projects that the budget deficit will dip to $600 billion, but then increase back to $800 billion the following year and continue to soar until 2019, which would also continue to add to the overall national debt.
The president has claimed his budget will cut deficits by $4 trillion. However, PolitiFact.com has found his plan does not cut $4 trillion in total, but less than half that amount over a 10-year period.
Famed investor and finance guru Jim Rogers stated in a recent interview with Yahoo! Finance’s Breakout that he has little hope to stave off the inevitable fiscal cliff. This year, he didn’t support either Romney or the president and voted the “protest vote,” but he didn’t say what third party candidate he voted for.
Rogers also added that it’s both the fault of the Democrats and the Republicans. Whatever Washington does, he doesn’t see any solution to the problem at hand, except to tackle the crisis dead on.
“None of this is good for us. Do you understand that the United States is at least in relative decline? They don’t understand down there [in Washington]. All they want to do is get re-elected,” said Rogers. “Let’s say there’s a fiscal cliff or not a fiscal cliff. We’re gonna have serious problems next year and the year after. For 2013 and 2014 you should be very worried, and you should prepare yourself.”
The latest numbers are not showing positive signs for the U.S. economy. Figures suggest that the annual rate of Gross Domestic Product growth is actually slower than the recovery during the Great Depression (from 1934 to 1940).
Economic growth has fallen to 1.3 percent per year and is expected to rise only to two percent for the next couple of years.
Also, the unemployment rate (officially) stands at 7.9 percent, but calculating the numbers shows that the jobless figure is more in the low-20s when adding in factors that the government doesn’t, such as a person who has stopped looking for work for more than one year, individuals who work part-time but are still seeking full-time employment and those who have given up looking for work.
In the past, Obama signed the stimulus packages, the U.S. has had to endure TARP, the federal government introduced cash for clunkers, the administration takes credit for the automobile bailouts and the Federal Reserve has pumped in so much money into the economy.
In order to improve the economy, Obama has cited increasing government spending or what is labelled as “investment” and to raise taxes on those earning more than $250,000 annually.
Due to the president’s policies and his support of Federal Reserve Chairman Ben Bernanke, Peter Schiff, former Republican Senate candidate and president of Euro Pacific Capital, warned Forbes and on CNBC that gold will go higher because of the perpetual U.S. dollar devaluation, higher inflation and the latest consumer price data.
The ways to solve the economy, according to Schiff, is to lower taxes, cut regulations and permit the system to go through a massive correction by having a deflationary recession.
“All of the people who were 100% wrong [back in ‘08] are saying that everything’s OK [now]. I am telling them they didn’t solve the problem and are making it so much worse,” stated Schiff. “I didn’t get lucky, I just understood the problem, and we are going to get another big one coming soon.”
Schiff even forecasts gold hitting $5,000 in a few years.
Economic Collapse News reported in October of a report by the independent Tax Policy Center (TPC) that concluded 90 percent of American households will see a significant tax increase as of Jan. 1 because tax cuts will expire.
What ECN wrote:
“According to the report titled “Toppling Off the Fiscal Cliff: Whose Taxes and How Much?”, the typical middle-income family earning between $40,000 and $64,000 annually could see their taxes rise by $2,000 in 2013. A household generating an annual salary of between $110,000 and $140,000 could possibly see a tax increase of $6,000. The top one percent of the United States may receive a tax bill of an additional $120,000.
“Low-income households would be also affected by the tax credits put into place by the 2009 economic stimulus plan by President Barack Obama.
“For most of American households, the two biggest increases would be the provisional reduction in Social Security taxes and the cessation of the 2001/2003 tax cuts.”
Even more taxes are expected in the next four years. Citing Congressional Research Services (CRS) estimates, HSBC Holdings Plc. noted that the Obama administration may put forth an initiative to impose a carbon tax that could generate $154 billion by 2021.
Furthermore, the president has proposed raising the death tax rate to 45 percent from 35 percent and eliminating or cutting the $3.5 million exemption.
As part of Obamacare, a Medical Device Tax will be placed on companies that make such devices as prosthetic limbs, pacemakers and operating tables. Also due to Obamacare, entrepreneurs will be paying a 3.8 percent self-employment tax, up from 2.9 percent in 2012.
Forbes published a list of the president’s tax stances for his second term: opposes tax reform, wants to raise taxes on the affluent, opposes low tax rates, wants to maintain subsidies and tax benefits for green companies, wants to raise taxes on investment income and continue applying tax on foreign earnings by U.S. companies and make it difficult for them to avoid taxes.
Three-time presidential candidate and retiring Texas Congressman Ron Paul has long been opposed to Obama’s tax-the-rich proposals. He made his stances clear in an interview with CNN during the debate earlier this year.
“It’s not going to do any good at all. It’s not a lack of taxation that’s going on, there’s just too much spending and it doesn’t solve the problem. I see no advantage to doing what he’s doing,” said Dr. Paul.
“But that doesn’t mean we should attack wealth for the sake of wealth. We should stop all the subsidies to the wealth and if anybody is getting wealthy because they’re getting contracts from the government or because they’re on the inside of the program they get the bailouts. That’s quite a bit different; we should stop that, but not blanketly penalize people who make wealth and who have created wealth and provided great services for the consumer.”