Can President Obama Really Help the U.S. Economy?
Economics / US Economy Nov 09, 2012 - 05:09 AM GMT
Sasha Cekerevac writes: When it comes to the latest presidential election, the central focus for many U.S. citizens has been the lack of gross domestic product (GDP) growth for America. Since the Great Recession began several years ago, GDP growth has remained far below potential, leaving millions of people unemployed and looking for work. During this time, the global economy has also slowed. While President Barack Obama has made large claims about what he can do to help increase GDP growth, let’s take a look at the most likely scenario.
During a presidential campaign, all politicians will make grandiose claims about how they can solve all of the country’s problems and kick-start GDP growth. Of course, we all know that the president does not create jobs in the private sector, but creates a structure that can either help or hinder job creation. With the global economy continuing to slow, many Americans are hoping that President Obama’s second term is far more business-friendly than his first.
Because the president faces a House of Representatives that is controlled by the Republican Party, the fear of political gridlock is now becoming a reality once again. With the fiscal cliff issue looming on the horizon, this divided political structure will surely slow the decision-making process. All hurdles to GDP growth should be avoided by both political parties. As much as it is rare to see, both sides should come together to help create the foundation for America’s GDP growth to increase to acceptable levels. With a sluggish global economy, America cannot look to other nations to help pull it out of this trough.
This is the reason that markets are selling off on the news of Obama being re-elected; uncertainty is not welcomed by businesses of any size. With the political situation now being in a gridlock, there is no certainty that any solid re-structuring of the economy can take place. For GDP growth to start growing again, all business owners need to feel certain of future regulations and policies. Not being able to turn to the struggling global economy, this higher level of uncertainty at home is a strong hindrance to faster GDP growth.
Unfortunately, with essentially the same political split as we’ve seen over the past four years, hope and enthusiasm for the future is certainly being diminished. We’ve seen lackluster GDP growth for the last four years, and we’ve seen uncertainty rise. We’ve seen serious issues not resolved, but delayed and postponed. Unfortunately, the massive fiscal cliff issue won’t likely be resolved until the last minute, if at all.
With much of the global economy slowing down, many had hoped that a unified political structure could help speed up reforms and kick-start GDP growth once again by beginning to offer incentives. Unfortunately, with this political split between the president and the House of Representatives, it appears that the gridlock and the lack of ability to compromise will be the norm again. Naturally, this certainly would lead one to believe that GDP growth will remain below potential for some time to come.
By Sasha Cekerevac, BA
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