Another election cycle is over, though with over US$6 billion spent on the various campaigns across the country, the political landscape looks practically the same today as it did yesterday. This, I fear, may be the outcome the U.S. economy could most ill afford at this time. While President Obama’s reelection delivers clarity on a few issues important to the economy, the partisan status quo that remains in Congress likely raises the risk of recession.
First, the clarity. With Romney out of the equation, President Obama’s signature health care reform is probably cemented in place. You can debate the economic impacts of the legislation, but at least businesses and individuals will know that it’s here to stay and can begin forming up plans to adjust to the new health care regime. Next, Fed chairman Ben Bernanke still has a job…if he wants it. Governor Romney had pledged to remove Bernanke from his post when his second term expires in 2014. This probably ensures that Bernanke’s easy-money policies will continue, even if he declines a third term.