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.
Obama laid out a rescue plan for the housing crisis. Obama proposed 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.
Rising unemployment is another challenge for President-elect Obama. 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.
Obama has pledged to extend unemployment benefits and eliminate taxes on those benefits. He supports 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.
Those could include extending unemployment benefits and food stamps, funding state and local infrastructure projects as a means to create jobs, providing federal funds to state governments to cover rising Medicaid costs, offering mortgage relief for struggling homeowners, implementing tax cuts or rebate checks or even extending existing tax rates, and possibly providing money to help Americans pay for higher heating bills this winter.
Who will pay higher taxes and who will get a tax cut became a defining issue in this election, with "Joe the Plumber" becoming a symbol of American fears of "redistribution" of wealth through changes in tax policy.
Obama says he wants to preserve the Bush tax cuts for families earning less than $250,000 and wants to expand tax credits for low-income families as part of his Making Work Pay program.
For families making less than $250,000, Obama supports higher taxes. But he would eliminate income taxes on seniors making less than $50,000 and encourage job creation; he wants to eliminate capital gains tax on small businesses and startups.