Post-Elections, Nouriel Roubini Sees a U.S. 'Fiscal Train Wreck'

Economist Nouriel RoubiniNouriel Roubini, the New York University economics professor with the nickname "Dr. Doom," has written an editorial in the Financial Times titled: A presidency heading for a fiscal train wreck. In it, Roubini gives plenty of credit to President Obama and his administration for preventing another depression, but he fears the president's policies were too short-term. And with the looming political change in Washington and two years of gridlock in prospect, those policies will not only expire, leaving fiscal pain, but new ones won't be implemented.

"Obama," Roubini says, "inherited the worst economic crisis since the Great Depression," as well as a large budget deficit. "His stimulus package, together with a backstop of the financial system, low rates and quantitative easing from the Federal Reserve, prevented another depression." Further, Roubini supports Obama's "growth now," rather than an "austerity now" path. And Obama did all that with a Republican party "trapped in a belief in voodoo economics," which blocked him every step of the way.

"Already a Dirty Word"


Still, Roubini says, none of those good moves are going to make much of a difference after the elections because fiscal policy will likely take a different route. "The term stimulus is already a dirty word, even within the Obama administration," Roubini adds. "After the Republicans make significant electoral gains further stimulus is even less likely." And this, just when the economy needs the boost most to prevent a double-dip recession.

What could have Obama done differently? Roubini says the president should have anticipated what the economy will need and acted accordingly by reducing entitlement spending (funds for programs like Medicare/Medicaid, Social Security) and creating plans that could have been phased in over years. Sadly, he notes, this hasn't happened. In fact, the opposite will now take place.

With near-zero interest rates and global risk aversion, more investors will turn to safe dollars and U.S. debt, especially if China continues to keep its currency depressed. And the U.S. doesn't suffer just from federal debt, but from "unfunded Social Security and Medicare liabilities, state and local government debt, and public pension bills that add up to many multiples of U.S. GDP."

Luckily, the Fed's easing, which will remain the administration's main policy, will prevent the worst of the coming fiscal train wreck, Roubini says. But the risk is that Obama will then preside over Japanese-style stagnation, where growth is barely positive, and deflationary pressures and high unemployment linger. He fears that such a fiscal mess may become Obama's worst legacy.

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tevroc143

The Republican Party only cares about the elite who they call their base. The middle class is being destroyed by the GOP. Bush took office in 2000 with a balanced budget and a surplus from a Democrat. He and the GOP House and Senate for 6 years of his 8 year term, spent like drunken sailors, yet never paid a dime for anything. They literally doubled the national debt. I am voting a straight Democrat ticket tomorrow. I would advise all Democrats and Independents to get out the vote tomorrow and stop the GOP from taking over. Nothing will improve under GOP control. They will continue to destroy America for their elite base. This is why the GOP tells you they must stop the stimulas package, but must borrow over 700 Billion more to give tax cuts to the top 2%. No jobs have been created under the Bush Tax Cuts for the rich. Bush had a net jobs loss and jobs are still not being created since the inception of the tax cuts. They could care less about spending or borrowing as long as they can deliver to their elite base. The Party of No has been determined to destroy Obama and don't care that they are hurting us. Vote NO to the GOP tomorrow!

November 01 2010 at 12:14 PM Report abuse rate up rate down Reply
sarge617

Just so everyone on here knows, I try to deal with facts as I know them . I live in a town in NW PA of about 5000 people. Here we are concerned about jobs, education for our kids, health care, etc. what we see, and what we hear, and what we KNOW, is that the republican party is always blocking legislation for retired people, for veterans, for education. states cannot hold the line on tax revenue becaue the right wants to cut tazs, which may work out well for business and individuals making big money, but it's the little guy that is taxed on every thing. I don't claim to be right, or left, conservative or progressive, I just want to live in a world where old people don't have to worry about money any longer, where my kids and everyone elses go to bed at night warm and dry with a full belly, and that they are healthy. and I see republicans constantly trying to pass legislation to cut things, deny things, prevent things from happening. Like hearing it or not, Bush and his party rammed through changes on Social Security that were NOT funded (meaning he never paid for them) and got us into 2 wars that were not funded. Obama did the same thing with health care in a democrat controlled house. Difference is, those changes help more than 30 million americans. How do you respond to that with out all the name calling and denigrating comments that are so popular on here...in other words, can you respond in a coherent manner??? By the way, the article quoted in my last post about VA cuts was dated in September.

October 30 2010 at 9:53 PM Report abuse +1 rate up rate down Reply
sarge617

As ThinkProgress noted yesterday, Deficit Commission co-chair Alan Simpson recently started a political firestorm by complaining that Veterans benefits allocated for servicemembers exposed to Agent Orange run contrary to efforts to control federal spending .” He even went as far as to say that the irony is that the Veterans who saved this country are now, in a way, not helping us to save the country in this fiscal mess.”

October 30 2010 at 9:19 PM Report abuse -1 rate up rate down Reply
acc56

sarge, I say take care of our vets, they are the freedom keepers for us. I only wish you were 100% HEALTHY. Thank you. Sarge Acc56 11 Bravo Viet Nam 69-70 1st 7th Air Cav

October 30 2010 at 5:57 PM Report abuse rate up rate down Reply
3 replies to acc56's comment
acc56

I could not be more pleased that we went from flower to facts. I also gave you guy a few thumbs up for keeping this on topic. Gates and Buffet are in the mix as useful idiots, in my opinion, serving there MASTERS, on a higher scale then us, but well blow them. I have no need for spell check. By the way both of these dirt bags are for death panels, that means good bye to us, but not them. Education will let FREEDOM ring. Don't fall for black or white, right or left, it is US against them.

October 30 2010 at 4:44 PM Report abuse rate up rate down Reply
sarge617

hey RYAN, have a question for you. You say your friend was injured, etc. etc. well who is footing the bill for this guy? I mean, wa she in the military then, or working in a private capacity. I, myself, am a 100% service connected disabled veteran (VIET NAM) and the VA compensates me. What are your feelings on that, do you think I am lazy and undeserving of compensation, or do you believe that the government should honor it's commitment to all veterans? Most of the "righties" I talk to or read about want to cut vets benefits, until of course a war comes up, then it's "where are the troops"

October 30 2010 at 4:29 PM Report abuse rate up rate down Reply
acc56

For those that don't know the Rothschilds, they are the world riches, with 500 Trillion dollars (NOT A MISPRINT). If you never heard of them they own the major media outlets so they can stay out of the news. Let me not forget they own The Bank of England and controling interest in the Private OWNED, Federal Reserve. They financed wars for two hundred years, BOTH SIDES. What is happening in the United States of America is by design to destroy U.S. middle class and get rid of our GOD given rights, Bill of Rights and Constitution.

October 30 2010 at 1:38 PM Report abuse +1 rate up rate down Reply
acc56

Obama is just a front man for the SUPER RICH RothsChildren.

October 30 2010 at 1:05 PM Report abuse -2 rate up rate down Reply
PAULA

I wonder after he has spoken if the changes he has in mind, will make a dirrerence or what exactly is in it for him being the Obama supporter he is. You know there are not that many supporters of Obama that are for we the people, they usually have thier hand out for something, I wonder what it couls be?

October 30 2010 at 12:56 PM Report abuse +1 rate up rate down Reply
Have blessed day

Find me a bridge

October 30 2010 at 12:38 PM Report abuse +2 rate up rate down Reply