Inflation is at a 23-year high. Tensions are rising in the Middle East. A potential recession is impacting America’s economy.
With the presidential election here today, the country’s next leader will have to confront an array of challenges with their arrival in office. How the new president addresses these issues in the first months of office could determine the nation’s future.
One of these issues is the state of America’s economy.
Inflation in the nation has hit a 41-year record over the past 12 months with consumer prices increasing a staggering 9.1%, according to a CBS article from July.
The risk of a hard landing remains as inflationary pressures persist.
Currently, the nation seems to be unaffected by the rising interest rates, with unemployment staying low and stocks reaching new highs. The United States’ economy seems to be in the calm before the storm, and economists predict a recession.
As the Federal Reserve lowers interest rates to combat inflation—which is hitting a 23-year high—the traditional concerns of recession loom because the nation has a history of going into recessions shortly after interest rate peaks, like the devastating 2008 recession shortly, according to CNN.
Additionally, there’s concerns about how decreasing the inflation rate through interest rates peaks may translate into potential recession.
When the Federal Reserve increases interest rates, demand for general goods and services go down as a result, causing companies to lay off or hire less workers, creating a recession.
According to an article from the American Enterprise Institute, while inflation has been reduced, the pre-recession effects of interest rate peaks have started. Unemployment is its highest in three years at a rate of 4.3%, and consumer demand is waning.
In the next four years, either Kamala Harris or Donald Trump faces the daunting task of working with the Federal Reserve to address inflation while ensuring economic stability for all Americans and preventing a future recession.
Without prompt intervention, the fragile gains made by the current government in reducing inflation could quickly erode, leaving American families vulnerable to rising costs and economic uncertainty, along with rising unemployment rates.
Another issue that must be addressed by the future president is the U.S. budget deficit.
According to CNBC, the U.S. budget deficit has topped a record $1.8 trillion the past year under the Biden Administration, an increase of more than 8% from 2023.
These record-breaking statistics demonstrate a major fiscal challenge to the nation’s government. This deficit holds many implications of what effects it can have on domestic policy and foreign engagement.
High borrowing costs are eating into the budget and leaving less room for essential investments, including those needed for economic growth, social programs, and stability in the Middle East.
Investment is important for ensuring stability of the government and stability among international allies by expanding clean energy use, ensuring economic development in the Middle East, all factors that can ease instability.
The foundation of the government and the issues it can address depends on its fiscal capabilities, which are impacted by the deficit.
As the Israeli-Palestinian war reaches its one year milestone, conflict management in the Middle East has started to rise higher and higher on the nation’s list of priorities, and is an issue that will have to be addressed by the next president.
Adding to this, the recent assassination of Hassan Nasrallah, the Iranian militia leader and leader of US-classified terrorist group Hezbollah, has raised concern about how the U.S. plays into the future of the Middle East as a nation that’s incredibly involved in its conflicts, according to NPR.
The death of Nasrallah heightens tensions between Hezbollah and Israel, which could potentially destabilize the Middle East even more.
The U.S. has significant interests in the Middle East, including energy resources, trade routes, and political alliances. An unstable Hezbollah or wider conflict could disrupt the region, leading to more chaos, increased terrorism, or threats to U.S. allies like Saudi Arabia and Israel.
The next president is tasked with addressing the rising tensions within the region.
This ongoing conflict will demand U.S. involvement. According to a Chatham House article, whether it’s pushing for a ceasefire, addressing humanitarian issues, or supporting long-term peace processes, the U.S. will need to play a balancing role.
The next president will need to navigate a complex national environment while still balancing U.S. international interests and maintaining global partnerships to ensure stability, especially considering recent escalations.