WASHINGTON, Oct 31 (AFP) - These are the top economic challenges facing the next president, be it President George W. Bush or his Democratic rival John Kerry:
THE BUDGET DEFICIT
The deficit has mushroomed for three consecutive years, setting a record 413 billion dollars in 2004. "The prospect for large resistant budget deficits is our number one economic problem," said Mark Zandi, analyst at economy.com.
Both candidates vowed to halve the deficit in four or five years. Bush wants to spur growth by lowering taxes. Kerry wants to roll back taxes for rich but cut them for the middle-class.
OIL
New York crude has gained two-thirds in a year and now bubbles at more than 50 dollars a barrel. "Oil will present one big issue for the next president," said American Enterprise Institute analyst John Makin.
If prices stayed high, they risked weighing on consumption and raising prices. But the next president would not have much room for manoeuvre. Tapping the emergency Strategic Petroleum Reserve would serve only to delay oil price increases, he said, advocating instead a focus on energy conservation.
FALLING DOLLAR
The dollar has lost a quarter of its value against the euro in two years. But "whoever wins, the dollar will weaken and that will help raise the demand for US products and help the US reduce its current account deficit," Makin said.
THE TRADE DEFICIT
The gap grew to a record 489.4 billion dollars in 2003. Coupled with the budget deficit, it is a long-term concern because it reveals the US dependence on financing by foreigners, particularly from China. China accounted for one-quarter of the 2003 US trade deficit.
ECONOMIC GROWTH
It is not yet vibrant and consumers are showing signs of strain. "The economy has improved but it (the wealth) has not dropped down to benefit the average American household. In terms of household finances, most are not back to where they were four years ago," Zandi said. Bush plans to cut taxes to boost consumption. Kerry plans to raise the minimum salary from 5.15 dollars an hour to seven dollars by 2007.
JOBS
The unemployment rate was 5.4 percent of the workforce in September but "it's not really capturing how weak the labor market is now," said Jared Bernstein, analyst at the Economic Policy Institute. Including discouraged workers, who do not feature in the data because they no longer hunt for work, the rate was more like seven percent, he said. The economy added 96,000 payroll jobs in September, leaving the economy with 820,000 fewer payroll jobs than when Bush took office.
RETIREES
Caring for retirees is one of the big tasks of the future, as the baby-boom generation begins to quit work in 2008. Bush has proposed letting younger wokers put some payroll tax into "personal retirement accounts."
HEALTH
The biggest spending item on the budget, with an ageing population and medical advances likely to push the costs higher. Bush, who has promised to extend drug reimbursements for the elderly, is calling for expanded medical savings accounts. Kerry, who wants to expand health insurance coverage, wants to lower the cost of drugs.
ALAN GREENSPAN'S DEPARTURE
The Federal Reserve chairman is due to leave his job 2006. "The next president will have to replace him. Both (presidential rivals) have candidates acceptable to Washington and to Wall Street," Zandi said. Kerry is reportedly leaning to former treasury secretary Robert Rubin. If Bush wins, the rumors favor Martin Feldstein, former chief economic advisor to then president Ronald Reagan, and Glenn Hubbard, one of the authors of Bush's tax-cut plan.
10/31/2004 02:19 GMT - AFP