President Barack Obama has won a second term. And in doing so, financial advisors say there’s a very long laundry list of issues President Obama must -- without fail -- address and solve. Here’s a look at some of those issues.
Clearly, economic recovery needs to be high on the list of things for President Obama to focus on and that has two components, says David Mendels, CFP, director of planning at Creative Financial Concepts.
In the short term, Mendels says it means finding a way to avoid careening over the upcoming fiscal cliff while weaning the economy from economic stimulus.
Fix Social Security
In the longer term, Mendels says President Obama needs to focus on reducing our unsustainable deficits and there is no way to do that without finding some way to restrain the growth of our entitlements, primarily Medicare and Medicaid.
“As Mr. Clinton would say (although he might prefer not to say it in this context) it is simple arithmetic,” says Mendels. “There are any number of ways of doing it, but you can’t just tax your way out of that one or solve it by cutting back on Big Bird.”
Social Security is a much less difficult problem, arithmetically, since the growth in per person costs is more restrained. “But it is also unsustainable in its present form,” says Mendels. “The solutions to these issues are politically difficult, but the problems are not insoluble.”
Others agree that the government needs to adjust the “entitlement system in America,” but they say it’s an uncomfortable topic.
“I don’t know what the right answer looks like I do feel that we need to encourage workers to work and reward those that have worked by keeping Social Security intact even though it might need some adjustments,” says Ben Keel III BBA CFP, ChFC, CFEd CLU, of Financial & Insurance Consultants. “I am all for reaching down and helping the people that are down and out and giving them a hand, so don’t read into my comments; however, the whole system needs to be reevaluated and adjusted. “
For the record, Mendels hesitates to suggest that his list of concerns must be resolved ‘without fail’ since the unknown problems will probably end up outweighing any of the known problems. “Moreover, the country has proved resilient enough to survive some rather incompetent presidents so I am optimistic that the country will survive regardless of who (won the election.)”
Slow government spending
Keel also says President Obama must slow down -- though it’s a very complex and complicated topic -- government spending. “Just like a company or a family cannot over spend and be sustainable, our government needs to reel in the spending and the debt,” says Keel.
However, Keel says we have a bit of a controversy brewing because Fed Chairman Ben Bernanke is trying to make sure the economy keeps moving forward but the tax increase coming on Jan. 1, 2013 could slow the economy. It’s a “conundrum,” says Keel, who speculates Bernanke released QE3 to avoid slowing the economy down.
“So while I say we need to slow down spending I do want our economy to keep moving forward and with the tax increases I can understand why QE3 was released,” says Keel.
That said, Keel doesn’t’ see politicians doing what is needed to slow down spending. “What we need is a true statesman that will put the country ahead of his or her own interest and curb some of the spending that the U.S. Government (both parties) have been doing for the past 20+ years,” he says.
Don’t cut military spending
Keel also says President Obama doesn’t need to reduce military spending. “We might need to reposition some of the spending; however, we need to maintain a strong military that is not be used on the people of the United States but to protect the people of the United States,” he says.
To illustrate his point, Keel quotes Sun Tzu, an ancient Chinese military general, strategist and philosopher who is traditionally believed to be the author of The Art of War; “Good fighters of old first put themselves beyond the possibility of defeat.”
So, says Keel, we have to maintain a strong military and do what we can to put ourselves beyond defeat.
Simplify the tax code
The government also needs to simplify the tax code. “When our own U.S. Secretary of the Treasury Tim Geithner has a hard time doing his own taxes (yes I understand he wasn’t Secretary of the Treasury at that time) then we need to simplify the complex system,” says Keel.
To that end, Keel says President Obama should get rid of AMT and reduce the tax code to a few, easy-to-understand pages. Plus, President Obama needs to reduce the tax rates for corporations/companies and for the citizens across the board. “Need some proof?” Keel asked. “Look up a chart that shows the growth of new companies, both small and large. The numbers have declined over the last 15 years.”
And Keel says the Obama Administration needs to encourage work and savings, not discourage that with high taxes.
Who is John Galt?
And, finally, Keel says we need to move back toward a “Constitutional Government, reduce the size of government, and let the states, and the people, decide what is best for themselves instead of moving more and more toward the National Government running more and more, also known as socialism.”
Says Keel: “We have case studies that can be reviewed about governments getting too big. Rome is one example and, I am afraid, if we keep moving down this direction we will soon be asking “Who is John Galt?’”