Challenge No 4: The bill that will come due
Let's imagine that all of Obama's plans to revive the economy actually work. There's still the matter of the bill. The TARP is $700 billion, though some of that may come back. Obama's stimulus proposal will probably be another $850 billion. (For perspective: The entire Defense Department costs about $700 billion a year.) And this comes after years of deficit spending. Can we really afford to do all of this?
Few economists think that this is the moment for America to suddenly get religion about the deficit. "No question, we should be concerned about the deficit; it has huge long-run implications," says Harvard's Rogoff. "But we're now facing a once-in-a-century crisis and we have to pay to get out of it."
Even so, the room for maneuvering is pretty narrow. UBS estimates that after the cost of the stimulus plan is factored in, the U.S. debt load will climb to just under 57% of gross domestic product in 2010. That's getting close to the red zone. "If the debt-to-GDP ratio got over 60%, that would make me nervous," says Zandi. At that point, the interest expense alone becomes a major share of the annual deficit.
By itself, the short-term deficit would still be a manageable problem. But there's a far bigger mess just around the corner: Medicare. Thanks to health care costs that grow 2.5 percentage points faster than the economy, Medicare's hospital-insurance trust fund is on course to run out of money in 2019.
Obama says his health plan could rein in some spending, because it includes programs to eliminate waste and ineffective treatments. But many health care analysts think his savings projections are highly optimistic. His proposal still lacks any strong constraint on the government's health care budget. Critics say it might just make matters worse. That said, Obama's promise of expanded coverage could go hand in hand with tough health care spending controls. Indeed, both may be essential to any compromise that passes Congress.
In the short term, the stimulus effort means that your taxes will likely be cut. And if you make more than $250,000, they might not go up as much as Obama said they would. Enjoy this while it lasts. "I can't imagine we can sit back and expect foreign investors to continue financing our ballooning deficit without some contribution by U.S. taxpayers," says Yardeni.
Your strategy, planning for taxes: As a hedge against rising tax rates, consider putting at least some of your savings in vehicles like the Roth IRA or the new Roth 401(k). Unlike with traditional IRAs and 401(k)s, the money you put into a Roth has already been taxed. But it will be tax-free when you withdraw it. A married couple can invest $5,000 a year per person (or $6,000 if over 50 years old) in a Roth IRA as long as their joint income is $166,000 or less. Those earning between $166,000 and $176,000 can make smaller contributions. There are no income limits for Roth 401(k)s - but you can do this only if your employer offers the option. A Roth isn't always best: If you are close to retirement and expect to be in a lower bracket, stick to a traditional IRA or 401(k).
Your strategy, planning for health care costs: Even if Obama's proposed health care reform plan gets through, the new pressure on the overall budget will still add to Medicare's strain. According to the Employee Benefit Research Institute, a person retiring in 2016 might easily need $200,000 in savings to fund Medicare premiums and out-of-pocket costs. If benefits are cut - and EBRI analyst Paul Fronstin thinks they will be - the bill will be higher. "Nothing I've seen from Obama yet is going to change that," says Fronstin. In 2007 the Medicare system also began charging high-income retirees higher premiums for Part B. With that precedent, there's a chance that means-testing will eventually hit the slightly less well-off. The bottom line: To cover health costs, you may need to build up a bigger nest egg than you think.
That's easier said than done in a perilous market. 
