The next U.S. president will face the worst economic crisis the country has experienced since the Great Depression of the 1930s.
What began with the explosion of the housing bubble has unfolded into a far-reaching global financial crisis affecting everything from banks to retail sales to the auto industry. Consumer confidence is hovering at record lows and consumer spending has declined for the first time in 17 years as Americans prepare to ride out what economists think could be the most severe recession in decades.
The first order of business for the new president will be to stabilize the economic crisis.
Helping distressed homeowners will be a priority for the new president.
"Just over 1 million households will lose their homes this year in foreclosure," said Mark Zandi, chief economist of Moody's Economy.com.
With one in six U.S. homeowners now "underwater" on their homes -- owing their mortgage lender more than what their home is worth -- this wave of foreclosures is likely to continue, economists say.
Both Barack Obama and John McCain have laid out rescue plans for the housing crisis. Obama proposes a 90-day moratorium on home foreclosures, which would give some homeowners a chance to catch up on missed payments and give the government a chance to develop a systematic plan for rewriting the terms of unaffordable mortgages for qualified homeowners. Obama also wants to empower bankruptcy judges to lower mortgage payments to keep people in their homes, something the mortgage industry opposes.
McCain has proposed a $300 billion mortgage buyout plan, using some of the $700 billion Congress recently authorized to buy troubled mortgages and renegotiate their terms to slow the tide of foreclosures.
Rising unemployment is another challenge for the new president. As consumers slow their spending, businesses are being forced to lay off growing numbers of workers. Some economists expect the next jobs report, due out Friday, to show that as many as 200,000 Americans were cut from company payrolls in October.
If Obama is elected, he's pledged to extend unemployment benefits and eliminate taxes on those benefits. McCain agrees with eliminating taxes on unemployment benefits. Both also support allowing more leniency on hardship withdrawals from 401(k) and IRA savings accounts, by temporarily lowering or suspending the tax penalties on withdrawals.
Many economists believe to that to boost the sagging economy, Congress will pass another economic stimulus package, perhaps even before the new president takes the oath of office in January. That is particularly true if Obama wins.
"I think this will be one of the most busy lame-duck sessions of Congress ever seen if Obama wins," said Brian Westbury, chief economist with First Trust Advisors.
Unlike the $168 billion stimulus bill approved last spring that provided direct rebates to taxpayers to stimulate spending, this stimulus bill is expected to address a variety of policy actions.