The Obama Economy
The Economic Stimulus ProgramPresident-Elect Obama has declared the revival of the US economy as his highest priority and has put together a strong economic team. An economic stimulus package is central to Obama’s plan. Estimates of how much might be spent on a multiple-year stimulus package range as high as $500 billion to $700 billion.
Fixing the US infrastructure / Achieving Energy IndependenceAt the center of the plan are investments in the nation’s roads, bridges, schools and alternative-energy infrastructure. According to the American Society of Civil Engineers, the total investment needed to fix our country’s infrastructure is estimated at $1.7 trillion dollars. Spread out over a 10-year period, this would result in investments of $170 billion per year.
Obama has said his plan will lead to the creation of 2.5 million jobs. We’re talking here about what could be the biggest jobs-spending program since FDR and the New Deal!
President-elect Barack Obama again linked economic recovery with new jobs in the sustainable-energy sector. He has vowed that within ten years, the United States will finally end our dependence on oil from the Middle East. This means investments in non-oil consuming energy such as solar, wind, geothermal and water powered energy.
The US construction industry and the US alternative energy industry may be slated to enter into one of the largest boom periods in American history.
Obama's Health Care ProgramObama has put forth an ambitious health care plan. The plan proposes the expanding eligibility for existing public programs, including both Medicaid and the State Children’s Health Insurance Program.
According to some of the best independent research groups, the Obama Health Insurance proposal would increase the federal spending by about $1.2 trillion over the next 9 years with expenditures of $133 billion per year.
The Cost of the New Obama EconomyBased on the investments targeted for the US infrastructure, on investments for non-oil consuming energy and expanded healthcare, we can foresee federal expenditures in the range of $300 billion per year.
This type of governmental spending may not be good for the US currency. It is probable, that as the Obama government pumps more into the economy, the US dollar may weaken in purchasing power if compared to the Yen, the Euro and/or the Swiss Franc. The new government has indicated it plans to raise taxes on the top 5% of the income earners. It will most probably issue new federal bonds to raise the difference.
Good for Exports / No So Good for ImportsA weaker US dollar is good for US exports. US goods will be cheaper in foreign countries, resulting in higher overall exports. Imports, on the other hand, will become more expensive. With the large trade imbalances that we currently have, with a weaker dollar, imports - in particular those from China and from Europe, may become more expensive. Companies, who are producing overseas with the intent of selling their goods in the United States, may see their costs go up. A tendency to pass the cost increases onto the consumer will be tempting, which could result in spiraling inflation costs.
Are we ready?President-Elect Obama has declared the economic revival as his highest priority. We can expect to see major federal expenditures being made to fix the infrastructure, to deliver energy independence and to greatly expand the national health coverage in America.
This could be one of the largest jobs-creating programs since FDR and the New Deal. Are we ready?
BRG is a global market information provider covering the construction material and alternative energy industries. BRG specializes in market sizing and helps companies with market sizing, market and competitive intelligence, market opportunity identification, market due diligence, mergers and acquisitions support and global market information. For more information, visit www.brgconsult.com.