Thursday, November 8, 2012

Four More Years

Who said it would be close?  Yesterdays US election showed the risk of relying on opinions polls to predict US elections when what ultimately matters is the share of electoral college votes.  On that front, President Obama has won well.

As I said last week, what ultimately mattered for us was the strength of the Presidents mandate, regardless of who won.  On that front the legislative process will remain fraught as Congress remains divided: the GOPs retained control of the House while the Democrats retained control of the Senate.

Early on it appeared Obama might win the Presidency but lose the Popular vote.  That would have made things more challenging for Obama as the GOPs would have no doubt claimed the moral victory.  As it turned out Obama assumed the lead as the vote count moved progressively west.

The immediate challenge for the President is averting the fiscal cliff.  On that I don't have much more to say at this point than what I said last week.  Both parties will need to work together.  The President can argue a fresh mandate, but a smooth process relies on the GOPs following the lead from Romney's concession speech and not risking partisan bickering and political posturing.  I hope that was more than just graciousness in defeat. We will soon see.

The challenges for America go beyond the immediate need to resolve the fiscal cliff.  There is still the bigger challenge of long-term fiscal sustainability.  That requires a comprehensive and credible long-term plan.  All we can really say at this point is that fiscal consolidation under Obama is likely to mean a mix of both revenue and expenditure initiatives.

The Obama victory removes some uncertainty around monetary policy.  The GOPs had been critical of recent Federal Reserve actions and Romney had committed to not renewing Ben Bernanke's tenure when his current term expires in early 2014.

More generally the election campaign was light on any broader policy agenda - from both sides.  A stronger America needs more than central bank action and aversion of the fiscal cliff.