Obama and the Economy:
Barack Obama's Presidency has been shaped by the 2008 financial crisis. At first, his policies seemed to help: GDP growth turned positive by the third quarter of 2009, and job losses stopped in March 2010. However, by the time Obama started his re-election campaign in 2011, it seemed the recovery had stalled. What happened? Did President Obama's economic policies fail? Find out what Obama's policies were, and their effects on economic growth.
Obama has been most severely criticized for not reducing unemployment below 8%. However, he can't force businesses to hire. Corporations have had record earnings, and are sitting on mountains of cash. They are using those funds to pay out dividends and buy up their stocks. The problem is insufficient consumer demand. Businesses won't hire until they are more confident demand is sustainable. Obama submitted the Americans Jobs Act in September 2011. It was criticized for having the same elements as the Stimulus Act, even though those policies worked.
In December 2010, Obama and Congress agreed upon additional stimulus in the form of a $858 billion tax cut. It had three main components: a $350 billion extension of the Bush tax cuts, a $56 billion extension of unemployment benefits, and a $120 billion reduction in workers' payroll taxes. Businesses received $140 billion in tax cuts for capital improvements, and $80 billion in research and development tax credits. The estate tax was exempted (up to $5 million) and there were additional credits for college tuition and children. Despite this tax cut, unemployment remained stuck at around 9% through 2011.
Wall Street Regulation:
In July 2010, the Dodd-Frank Wall Street Reform Act became law to improve regulation of eight areas that led to the financial crisis. The Consumer Financial Protection Agency improved regulation of credit cards and mortgages. The Financial Stability Oversight Council regulated hedge funds and banks that became too big to fail. The "Volcker Rule" banned banks from being too involved with hedge funds. Dodd-Frank clarified which agencies regulated which banks, stopping banks from cherry-picking their regulator.
Dodd-Frank also asked the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)to create additional regulation for the riskiest derivatives, like credit default swaps, and commodities futures. It also asked the SEC to recommend how the credit rating agencies, like Moody's and Standard & Poor's, could be improved. However, a year later, many of the regulations hadn't yet been enforced. The financial industry complained that these regulations were making them less competitive, and contributed to high unemployment.
Obama used deficit spending to stimulate the economy.
- FY 2012:$3.7 trillion spending, creating a $1.09 trillion deficit
- FY 2011: $3.8 trillion spending creating a deficit of $1.3 trillion.
- FY 2010: Spending $3.8 trillion, and creating a deficit of $1.6 trillion.
- FY 2009: Added stimulus spending to the Bush budget, creating a deficit of $1.4 trillion.
Health Care Reform:
America's health care system needed reform. Rising costs threatened to outstrip Medicare's ability to pay for it, and contributed to 50% of all bankruptcies. The quality of care was one of the worst in the world. solve these problems, Obama pushed through a $940 billion Health Care Reform Act in March 2010. Six months later, concerns over the program's cost helped Republicans win control of the House of Representatives in the mid-term elections.
Economic Stimulus Package:
In February 2009, Congress approved Obama's $787 billion economic stimulus package. It gave tax cuts, extended unemployment benefits and expedited funds for public works projects. In just seven months, it pumped $241.9 billion to the economy, stirring growth to a robust 3.9% by early 2010. Unemployment fell to 9.5%, from its 2009 peak of 10.2%. By March 30, 2011, nearly all ($633.5 billion) of the funds were spent. Growth slowed, and unemployment remained stuck at 9.1%. Despite the plan's success in ending the recession, some critics said it was ineffectual, while others said it wasn't enough.
President Obama's first action in 2009 was to assemble a team of economic advisers. Many of them had helped formulate the policies he had outlined during his 2008 campaign platform, which included an aggressive fiscal stimulus plan to put the country back on track. He was applauded for appointing former Federal Reserve Chairman Paul Volcker as the head of the Economic Advisory Panel. He named Mary Schapiro head of the Securities and Exchange Commission (SEC), which had allowed the Madoff Ponzi scheme. However, he was criticized for including former Treasury Secretary Lawrence Summers, who oversaw repeal of the Glass-Steagall Act. By January 2011, internal infighting had sent most of them -- Larry Summers, Christina Romer, Peter Orszag, and Paul Volcker -- on their way.
Has Obama Kept His Promises?:
In 2008, candidate Obama promised to get the economy out of recession, and change many of the policies that had caused it. He also promised to solve many long-term economic problems, like the high cost of health care, U.S. dependence on foreign oil, and stimulating more technology and innovation. In many areas he kept his promises, but on others he did not. Find out his specific scorecard in Obama 2008 Economic Promises and Platform.