In his inauguration address Monday, President Barack Obama laid out his vision for the nation over the next four years, emphasizing his commitment to tackle climate change and immigration; defend entitlement programs and fight for gay equality and same-sex marriage. Obama alluded to gun control legislation and his foreign policy agenda when he referenced the Newtown, Conn., school shooting and said “enduring security and lasting peace do not require perpetual war” but the president largely stayed away from both topics during the 18-minute speech.
But the issues that defined the presidential election - Wall Street regulation, the budget deficit and jobs – received brief mentions, a signal to policymakers that the administration may perceive other issues as more pressing and urgent.
The president’s decision to underscore his social policy agenda over fiscal matters was a deliberate move, according to Jim Rickards, author of “Currency Wars” and senior managing director at Tangent Capital Partners, an investment bank based in New York City.
Obama “does not want to wrestle” with tax reform, fiscal policy, and budget cutting in his second-term, Rickards says in an interview with The Daily Ticker. Instead, Obama wants to expand entitlement programs, not cut them, meaning four more years of trillion dollar deficits, he argues.
“There will be no grand bargain” on the budget, Rickards says. “There will be mini fixes just to keep the whole thing from falling apart…Obama will leave it to the next president” to find solutions to these problems.
The economy has shown signs of improvement over the past 18 months, led by a rebound in the housing and labor markets. The national unemployment rate stands at 7.8% -- still high by historical standards but down from its peak of 10% in 2009. Employers added 155,000 workers to their payrolls in December 2012.
Even as economy appears to be moving forward, fiscal policy remains accommodative. The Federal Reserve has pledged to keep short-term interest rates near zero until the jobless rate falls to 6.5% -- which may not happen until 2015. Economists project U.S. economic growth to average a modest 2.5% to 3% this year.
Rickards believes the U.S. economy entered a depression in 2007 and could actually be experiencing another recession in the current economic cycle – the same situation that President Franklin D. Roosevelt faced when he started his second of four presidential terms in 1937. Today's depression could last “indefinitely” Rickards says, but it all depends on the economic measures pursued by the White House.
Whether or not the economy will top President Obama’s second-term to-do list will be determined when the president addresses Congress on Feb. 12.
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