Obama to wrestle with huge economic challenges

Source: Xinhua | 11-06-2008 08:09

WASHINGTON, Nov. 5 (Xinhua) -- Barack Obama, who has won Tuesday's U.S. presidential election, will inherit a series of economic problems on a scale not seen since the Great Depression in the 1930s.

Democratic presidential candidate Barack Obama acknowledges the supporters at the election night rally in Chicago, the United States, on Nov. 4, 2008, after he won the presidential election.(Xinhua Photo/Zhang Yan)

The U.S. economy, struck by the current financial crisis, contracted in the third quarter of this year at an annual rate of 0.3 percent, signaling the country is likely heading into a recession.

The contraction came as nervous consumers cut back on their spending by 3.1 percent, the biggest amount since the second quarter of 1980.

It marked the first drop in consumer spending, which accounts for two thirds of overall economic activity, since late 1991, when the economy was coming out of a recession.

A recession is under way, but "it's too early to talk about the depth of the downturn," said economist Victor Zarnowitz of the New York-based Conference Board, who serves on the NBER committee, which identifies recessions.

"Some further credit tightening would tip us over into a more severe recession, but it is too early to tell," he added.

Many economists believe that new coming president's biggest challenge will be navigating a deep and potentially prolonged economic downturn.

"We know the challenges that tomorrow will bring are the greatest of our lifetime -- two wars, a planet in peril, the worst financial crisis in a century," warned Obama late Tuesday when claiming his election win.

"There are mothers and fathers who will lie awake after their children fall asleep and wonder how they'll make the mortgage, or pay their doctor's bills, or save enough for college," he said.

"There's no president in recent history that's had so many crisis to deal with ... This president's going to have his hands full," said Leon Panetta, chief of staff to the last Democratic president, Bill Clinton.

"The one good thing about the next presidency is, there's no place to go but up," he joked.

Like Franklin Delano Roosevelt and Ronald Reagan, the new president will get a rare opportunity to leave a sweeping and long-lasting imprint on the U.S. economy.

To save the economy from a possible severe recession, Obama has supported a second stimulus package worth about 150 billion dollars, though some outside economists are urging them to consider twice that amount.