Difficult question to answer but take a look at these links:

http://graphicssoft.about.com/cs/photoshop/f/elementscompare.htm

http://www.digicamhelp.com/processing-photos/advanced-editing/photoshop-elements-7-vs-photoshop-cs4/

These give some of the differences between them. Looking at the list, personally I think that that lack of layer masks and the pen tool in Elements is enough to disqualify it as a serious image editing tool, but others may disagree.

Have you looked at Paint Shop Pro? A lot cheaper than PS but has many of the same facilities.

Steve