PHOENIX (Reuters) - Memo to president-elect Barack Obama: be careful what you wish for.
The victor in Tuesday’s U.S. presidential election will face a host of acute economic problems on a scale not seen since the 1930s.
The spiralling financial crisis, meltdown in the housing market, and Wall Street chaos coupled with longer-term challenges like high health care costs and foreign energy dependence will be on the next president’s to-do list.
But analysts say Obama, now a Democratic senator from Illinois, will face his biggest challenge after becoming president on January 20 in navigating a deep and potentially prolonged economic downturn.
“The United States is in a profound recession, and when the next president takes office, chances are things will look as bad or worse as they do today,” said Kenneth Rogoff of Harvard University, a former chief economist at the International Monetary Fund who provided occasional advice to Obama’s defeated Republican rival John McCain.
“That problem’s going to be so pressing that it’s going to push a lot of other items to the back of the agenda.”
Many economic analysts hope that Obama puts his official economic team together quickly, perhaps by November 15 when outgoing President George W. Bush hosts a summit in Washington to discuss the global financial crisis.
Among the candidates frequently mentioned for the top job of Treasury secretary are former Federal Reserve Chairman Paul Volcker, former Treasury Secretary Larry Summers and Timothy Geithner, president of the Federal Reserve Bank of New York.
Obama, whose popular support strengthened on perceptions that he has a better grip on the economic crisis, has advocated a second government stimulus package worth $175 billion (111 billion pounds) that would include money for investments in infrastructure as well as another round of rebate checks.
“That’s the type of package Sen. Obama believes needs to happen right away,” Brian Deese, the Illinois senator’s deputy director of economic policy told Reuters.
The McCain camp criticized Obama’s plans as a return to a tax-and-spend approach, but Obama countered by saying the United States could not afford four more years of a Republican administration.
Though a recession will likely dominate the Obama administration’s agenda, other short- and long-term economic challenges will also feature high on the to-do list, economists and advisers said.
Obama has promised to revamp regulations governing Wall Street, to bring down the costs of health care, to boost indigenous energy sources and fight climate change by setting caps on carbon dioxide emissions for big industries.
But limited resources -- diverted to ease the financial crisis and fund the wars in Iraq and Afghanistan -- would hamper the ability of any president to achieve many of those goals.
“These are not things that are achievable,” said Jeffrey Frankel, an economist at Harvard’s Kennedy School of Government.
“Energy independence is basically not achievable. Balancing the budget is not achievable. Preventing us from going into a recession? It’s too late.”
Deese said Obama would not allow health care reform to be placed on the backburner. He has proposed a national program to allow individuals and small businesses to buy health care similar to that available to federal employees.
“Sen. Obama understands that our nation’s long-term financial challenges are intimately tied up with addressing our nation’s health care crisis and that we cannot wait on the type of ambitious reforms that he’s talked about,” he said.
On energy, Obama has emphasized massive investments in renewable energy technology as opposed to Republican calls for more offshore oil drilling and increased use of nuclear power.
Editing by Andrew Quinn and David Alexander