… and gives the nod to Barak Obama for a further term of four years as President of the USA. In what was billed as one of the closest contests ever, the incumbent emerged quickly with a clear lead in terms of Electoral College votes and his opponent conceded. As the day goes on, it will emerge just how close the race really was in terms of the popular vote, but in the final analysis, it’s the Electoral College vote that counts.
The Republicans have retained control of the House of Representatives whilst the Democrats have retained the Senate. This means that whilst President Obama has a fresh mandate, he is still stuck with a problem in getting his policies and legislation through.
The reaction of world stock markets to Mr Obama’s re-election has been somewhat muted with many markets essentially flat. This can be understood as a “business as usual” approach since financial and stock markets do not need to gear-up for a change of administration with concomitant changes in emphasis. However, as things stand, it is also the case that America is racing towards the edge of a so-called “fiscal cliff” which has the potential to plunge the world’s leading economy into recession with the predictable knock-on effects around the world.
The fiscal cliff referred to is an automatic spending cut and tax hike which will be imposed unless bipartisan agreement on the budget can be reached. Some $600 billion would be trimmed from the budget and clawed back in taxes in a bid to reduce the deficit. Analysts worry that if this is done in an automatic mode that the US recovery may be jeopardised which would have knock-on effects around the globe. The Federal government nearly ran out of money in 2011 because bi-partisan agreement on the way forward could not be reached. The compromise was to set the deadline, when automatic cuts would come in, for after the election (the Republicans had hoped to have the matter decided in the run-up to the election). The question is whether America’s politicians can set party differences aside and find a budget agreement which both parties can live with avoiding the financial precipice that neither side wants the nation to fall over - change you can believe in, right?