An economy in deep trouble, with rising unemployment, a financial sector in crisis, and a government budget deeply in the red, all face Barack Obama when he takes office in January.

The Democrat campaigned ahead of his Tuesday victory over Republican John McCain on the idea of eliminating tax breaks his predecessor George W. Bush handed wealthy Americans, providing relief to the middle-class and small businesses, and expanding health care to millions of uninsured people.

But the depth of America's economic troubles will challenge him to make good on all his promises.

Obama pledged in his campaign to create "five-million new, high-wage jobs" by investing in renewable-energy industries, and "two-million jobs by rebuilding our crumbling roads, schools and bridges."

$60-billion stimulus

He envisioned instituting a $60-billion stimulus package, in part to help the millions of home-owners struggling to pay their mortgages.

Some sort of new stimulus is needed for the flagging economy: if nothing is done, according to estimates by Moody's Economy.com, 7.3-million households will likely default on home mortgages by 2010, with up to 4.3-million families losing their homes.

Obama has also proposed opening substantial credit facilities for state and local government agencies which have found their own revenue streams hit by the financial meltdown and the slower economy.

Obama had planned to source some of those funds from the $700-billion bailout package approved by Congress in early October to salvage the financial system.

But already half of that has been spent by the Bush administration, mostly to fund the balance sheets of weak banks.

In September when the economic crisis took a sharp turn for the worse, Obama refined his economic plan, hammering home the notion that he was mainly focused on helping the middle class — seen as the primary victim of the economic downturn, hurt most by plummeting home prices and waves of job layoffs.

Jobs: Key challenge

Jobs will be a key challenge, with a recession widely expected after gross domestic product contracted by 0.3 percent in the third quarter.

Layoffs have risen on a monthly basis this year, with unemployment hitting a five-year high of 6.1 percent in September.

To avoid a prolonged recession, Obama has proposed to stimulate consumption, the engine of the US economy, by easing the tax burden for "95 percent of workers and their families."

A $3000 tax credit for businesses that provide domestic jobs was also in the cards.

"When we grow the economy from the ground up, then everybody does better," Obama had told supporters in Ohio on Sunday.

But Obama's approach came under attack during the campaign as "socialist," perhaps a warning of some of the resistance he might face once he takes office.

"Under a big government, more-tax agenda, what you thought was yours would really start belonging to somebody else, to everybody else," McCain's vice presidential candidate Sarah Palin told a rally ahead of the vote.

Affirming his intent to finance new government expenditures rather than grow the already-massive debt, Obama said he wants to return tax levels to those of former president Bill Clinton's era for people making more than $250 000 per year.

"The US has had the most unequal distribution of wealth" in the past 30 years, economist Max Wolff said, noting that the top 10 percent or people earn fully 30 percent of total income.

Balancing act

Economists saw it as a bit of a balancing act.

"Obama has a traditional (Democratic) policy of stimulating expenditures, middle tax cuts and raising taxes for the wealthy. He wants a greater role for the government," Edwin Truman, a senior fellow at Peterson Institute for International Economics, said just before the election.

But "the problem is that we face a big recession and we have a big budget deficit, so the capacity to do anything in terms of spending and tax cuts is very limited," he said.

As president Obama will also face challenges in funding his health care plan. He said he wants to extend health care to the 46-million Americans (out of a total population of 300-million) currently without insurance coverage, in part by making employers provide the insurance or contribute to a public fund that offered it.

AFP

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