News Release: Faculty Experts, Finance and Economics, Politics

Nov. 5,  2008

Election Finale Good For Global Economy, Says Emory's Rosensweig

The end of the 2008 election season will be good for the global economy, no matter who won, according to international finance expert Jeff Rosensweig of Emory's Goizueta Business School. "Uncertainty is always bad for an economy, and we live in the most volatile and uncertain of times. Removing this element of political uncertainty will certainly help."

Executives in finance and business generally fear an era with both U.S. Congress and presidency controlled by Democrats, says Rosensweig. "Rightly or wrongly, they think this could lead to massive government spending," he says. "In this unique case, such fears may be unfounded.

"First, the outgoing administration was one of the most profligate in U.S. history, to the dismay of many Republican fiscal conservatives," says Rosensweig. "Second, the present time, for the first time since the Great Depression, may call for some direct government spending to stimulate the economy. The job market is fragile at best, and could soon become awful. This is already apparent in the financial services, construction and manufacturing (e.g. auto) industries." 

Similar to the jobs created by Franklin Delano Roosevelt in the 1930s, President-elect Barack Obama may work with a Democratic Congress for a second stimulus package. "The first one, tax rebates, had only limited impact because much of it was saved or spent on imports, not on U.S. production," Rosensweig says.

As the economy continues to stall, Rosensweig expects the federal government to implement a temporary spending package aimed at directly creating jobs. "My own proposal is to hire unemployed construction workers, among others, to help rebuild the U.S. infrastructure.  Bridges, sewer systems, subways--they are all in disrepair.

Already, key economies such as Germany are enacting fiscal stimulus packages, Rosensweig adds. An effort will be made to globally coordinate such packages, as well as to capitalize the financial system.

Finally, Rosensweig does not look for a President-elect Obama to increase taxes within a few years on wealthier families as he has proposed. "It is one thing to get elected, another to govern," he says.

Given the backdrop of looming recession, Rosensweig expects the new president will realize this is no time to raise taxes in general, and despite his social goals, will have to delay such tax increases. "The U.S. goverrnment will clearly incur the largest budget deficit in history, leading also to a delay in Obama's proposals to boost healthcare coverage."


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