Obama Pledges To Complete Economic Recovery
RENEE MONTAGNE, HOST:
The economy has been a central issue in this presidential election, but it has been improving little by little. In the end, President Obama handily rolled to reelection, pledging, last night, to complete the country's recovery. For more, we turn to economic correspondent John Ydstie. Good morning.
JOHN YDSTIE, BYLINE: Hi, Renee.
MONTAGNE: Now, the weak economy was what Republicans hoped would unseat the president and that did not happen. What are the reasons for that?
YDSTIE: Well, it has been an historically weak recovery but there has been real growth during this election year. Unemployment has come down significantly, though it's still very high. But I think, historically, when an incumbent is running, the direction of these economic indicators is as important as their actual level.
Also, the exit polls showed the top issue on people's minds wasn't the economy. But those polls also showed a majority of people thought President Obama's policies favored the poor and the middle-class, while Romney's favored the rich. I think that suggests people didn't embrace the alternative path that Governor Romney was offering.
MONTAGNE: Now, the business community largely supported Governor Romney in this election. What impact will the fact that President Obama has been reelected have on the pace of economic growth?
YDSTIE: Well, you know, one thing a lot of business people have said during the past year, is that despite the fact that they have huge amounts of cash on hand, they haven't been investing because of uncertainty about what tax policies they'd face, about whether Obamacare would be repealed or fully come into effect.
Well, a lot of that uncertainty has been removed. I think its clear Obamacare is here to stay. Businesses are going to have to figure out how to deal with it. The president's view on taxes is more likely to become a reality, which would mean more taxes on the wealthy. So businesses may be more ready to move forward with investment now than they have been in the past, because they have a better sense of what the ground rules are likely to be.
I don't think we're going to see a big jump in the growth rate as a result, but maybe some incremental increase in the pace of growth. However, some business maybe incentivized to try harder to grow without adding workers, since the healthcare law now makes those workers more expensive. So, creating jobs could still be a struggle.
MONTAGNE: Well, businesses always do say certainty is good. But there is one very big uncertainty that's still with us. And that is the fiscal cliff, which we talk so much about but it is, right now, staring the president and Congress right in the face.
YDSTIE: That's right, Renee. The fiscal cliff is that huge hit of automatic tax increases and spending cuts that's due to take effect at the end of the year - actually the first of January, six hundred billion dollars worth and there's a lot of concern it could throw the economy back into recession, if the president and Congress don't produce an alternative plan for reining in deficits.
The challenge is that the political balance hasn't changed. My understanding is that the president will present a plan to Congress, as it returns next week - hope it gets passed in the Senate, then it would be up to the House. If the House balks because there are tax increases, it's possible the president could allow the government to go over the fiscal cliff.
That would mean automatic increases in taxes, as the Bush era tax cuts expire. And that would set up a situation where it would be possible to get a deal without anyone voting for tax hike, because you'd be starting from a point where taxes have already been increased. But it's a risky strategy.
MONTAGNE: Well, one thing we do know, now that President Obama has been reelected, is that Ben Bernanke will stay on as the chairman of the Federal Reserve. Does that provide any comfort to the market?
YDSTIE: I think it does. And I think the stock market has built its games in recent months on easy money. And if President Obama keeps - or if Mr. Romney had gotten rid of him that would've been a problem for the markets.
MONTAGNE: John, thanks very much, NPR's economic correspondent John Ydstie.
YDSTIE: You're welcome.
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