Published — Sunday 4 November 2012
Last update 4 November 2012 6:08 am
Regardless of who is elected in the US presidential elections on Tuesday, he will be sure of one thing — there will be hardly a honeymoon to entertain before embarking on the tough job of how to face up to what is generally known as the fiscal cliff.
If a deal between the executive branch of the government led by the elected president and the Congress is not reached before the end of the year, the government will face a shutdown as happened before during the first Clinton term.
The New York Times, in a lengthy editorial, endorsed President Barack Obama. It expressed confidence that he will challenge the Republicans on the fiscal cliff even if that means calling their bluff.
However, it expressed hope that a more compromising Congress will emerge after elections, willing to work for policies that the American public needs.
Days before the elections and almost two months before the country faces up to the fiscal cliff, the National Association of Manufacturers (NAM) in the US said that the ongoing recession has wiped out one million jobs this year alone, and that the economic depression will deepen if the Congress fails to act quickly and on time.
If that is to happen, another six million jobs will be lost in 2014, which will be sending unemployment to double-digit at an estimated 12 percent rate as a result of continuous layoffs, jobs becoming vacant and lack of investments that is expected to plateau at $ 60 billion.
The NAM report, seen as relatively independent and honest in reflecting the realities of the market and not affected by the ongoing election atmosphere, went a step further to call on politicians to stop blaming each other and show some care in facing up to problems that need concerted efforts and time to make the necessary turn around takes hold.
The fiscal cliff talked about is regarded as the toughest the country faces in four decades.
If not handled well, it will push the country back into a recession and the non-partisan Congressional Budget Office (CBO) predicts that such recession would be significant, though brief, but given the fact that the USFederal Reserve will be out of option to run a monetary policy since it has exhausted its use of interest rates cut, there is a growing possibility of a deep recession and worsening employment situation.
This is a great age of uncertainty. Accordingly, already the US GDP has lost 0.5 percent because of the uncertainty associated with the incessant talk about the upcoming fiscal cliff and the lack of political will and concentration on how to handle the issue.
One example is the issue over the national debt that has already exceeded $ 16 trillion. There are questions how to harness it and forge a way out. Here comes the difference between the two approaches of the democrats led by Obama, who prefers to allow Bush tax cuts on income of more than $ 250,000 a year to expire immediately, while the republicans led by Mitt Romney want to extend the tax cuts for another year and give the Congress the time it needs to come up with a thorough plan to reform the economy in a more drastic and detailed way.
Sensing the upcoming threat of the fiscal cliff, some 80 high profile executives expressed their willingness and readiness to accept more taxes in return for a sizable government spending cuts starting with the military, where the Pentagon is believed to be open to cut reaching as high as $ 400 billion proposed by Obama.
Though Romney tried during his debate with Obama to sound a less war monger and agree more or less to the line adopted by the current democratic administration as far as foreign policy is concerned, which involves less military involvement with the outside, yet the bottom line is how the US can live within its means, be able to generate more income and sharpen its educational, research and managerial expertise to compete well in a more globalized economy.
The national debt issue summarizes this situation. If it were not for America’s political and military clout, such debt would have been in the hands of the International Monetary Fund (IMF) to look for solutions, just like any developing country. Britain has been through this bitter medicine in the 1970s when the then labor government was forced to knock on the doors of the IMF.
IMF Managing Director Christine Lagarde, using the same term of the fiscal cliff, has already warned Washington that it does not have much of a time left after the presidential elections to face up to harsh economic realities that need one thing — tough decisions.
It is no longer business as usual, and no honeymoon in the offing for whoever is going to occupy the Oval Office.