Economic policy of the Barack Obama administration

As the economy improved and job creation continued during his second term (2013–2017), the Bush tax cuts were allowed to expire for the highest income taxpayers and a spending sequester (cap) was implemented, to further reduce the deficit back to typical historical levels.

[15] President Obama also attempted to address inequality before taxes (i.e., market income), with infrastructure investment to create middle-class jobs and a federally-mandated increase in the minimum wage.

[26] The Bush Administration had passed the $700 billion Troubled Asset Relief Program in October 2008 and provided enormous loan guarantees to help strengthen the banks as late as January 2009 during the transition period.

Further, the U.S. Federal Reserve under Ben Bernanke was taking a series of innovative emergency steps to inject money into the financial system, acting in their role as the "lender of last resort".

[1][27] On February 17, 2009, Obama signed into law the American Recovery and Reinvestment Act of 2009, a $787 billion economic stimulus package aimed at helping the economy recover from the deepening worldwide recession.

[37] The economy of the United States has grown faster than the other original NATO members by a wider margin under President Obama than it has anytime since the end of World War II.

As the economy recovered towards full employment, a reduced labor force participation rate among prime working-aged persons (between ages 25 to 54 years old) accounted for a greater share of the shortfall.

[1] On December 10, 2014, the President himself, together with JP Morgan's Jamie Dimon, helped whip House votes in favor of the "cromnibus" spending bill, which included a provision that progressive lawmakers argued would significantly weaken the Dodd-Frank regulations.

It was built on three related concepts, including: 1) Subsidies for low-income persons to help them purchase health insurance; 2) Guaranteed issue and community rating, meaning persons with pre-existing medical conditions could not be discriminated against; and 3) Coverage requirements, enforced via both individual and employer "mandates" with financial incentives supporting them, to ensure healthy people (with few medical bills) would participate to help keep insurance costs down for all.

[72] Healthcare historian Paul Starr said in December 2017, "If you trace the origins of the ideas in the ACA, it was basically a bi-partisan bill passed on strictly partisan lines.

"[77] However, despite federal financial incentives to do so, many states with Republican governors chose not to expand Medicaid to their residents under the ACA, which adversely affected coverage for lower-income citizens while reducing costs.

[10] The 2017 Economic Report of the President also stated that ACA has improved healthcare quality, saying Since 2010, the rate at which patients are harmed while seeking hospital care has fallen by 21 percent, which is estimated to have led to approximately 125,000 avoided deaths through 2015.

For example, automatic stabilizer spending (such as unemployment compensation, food stamps, and disability payments, which increased without legislative action) ranged between $350–420 billion annually from 2009 to 2012,[88] roughly 10% of the expenditures.

This resulted in a series of bruising debates with the Republican Congress, which attempted (with much success) to blame the President for the deficits caused primarily by the recession that began during the Bush administration.

[92] The compromise overcame opposition from some in both parties, and the resulting $858 billion Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed with bipartisan majorities in both houses of Congress before Obama signed it on December 17, 2010.

[96] President Obama referred to the situation as a "manufactured crisis", while Senate Minority Leader Mitch McConnell called it "a new template...[raising] the debt ceiling will not be clean anymore.

Separately enacted as part of Obamacare, individual mandates and tobacco taxes impacted the middle class slightly, although they were mainly designed to adjust behavior rather than gather revenue.

[87] The CBO had forecast that cutting the deficit towards the current law baseline would have a significant risk of recession in 2013 along with higher unemployment, so a more moderate trajectory was chosen by the President and Congress.

Both Martin Wolf[165] and Paul Krugman[166] explained that as the Great Recession hit, the saving (deleveraging) of the private sector significantly increased, while business investment declined in the face of reduced consumer spending.

Supporting the recovery process were the stimulative monetary policies of the Federal Reserve, which maintained low interest rates and asset buying programs to encourage economic growth throughout President Obama's tenure.

In 2008, The New York Times, which had endorsed Hillary Clinton,[183] charged that, in revising his bill, Obama had "removed language mandating prompt reporting and simply offered guidance to regulators".

"[185] Obama and other senators introduced a bill in 2007 to promote the development of commercially viable plug-in hybrids and other electric-drive vehicles in order to shift away from petroleum fuels and "toward much cleaner – and cheaper – electricity for transportation".

Obama supported the Employee Free Choice Act, a bill that adds penalties for labor violations and which would circumvent the secret ballot requirement to organize a union.

[208] In January 2014 he signed an executive order raising the minimum wage for federal "workers who are performing services or constructing buildings" to $10.10/hr and began garnering support for a bill to enact this change nationally.

"[230] Obama reaffirmed his commitment to net neutrality at a meeting with Google employees in November 2007, at which he said, "once providers start to privilege some applications or web sites over others, then the smaller voices get squeezed out, and we all lose.

[239] During an October 13, 2008 speech at Toledo, Ohio, Obama said that for the next two years, he favors a $3,000 tax credit to businesses for each new full-time employee whom they hire above the number in their current work force.

"[242] Thomas L. Hungerford of the Congressional Research Service has written that "allowing the tax cuts targeted to high income taxpayers to expire as scheduled could help reduce budget deficits in the short-term without stifling the economic recovery.

That's why he opposes these ballot initiatives, which would roll back opportunity for millions of Americans and cripple efforts to break down historic barriers to the progress of qualified women and minorities.

"[268] In July, Obama stated, "I am a strong supporter of affirmative action when properly structured so that it is not just a quota, but it is acknowledging and taking into account some of the hardships and difficulties that communities of color may have experienced, continue to experience, and it also speaks to the value of diversity in all walks of American life.

[272] Obama also noted that free trade comes with its own costs: he believes the displacement of Mexican farmers by more efficient American counterparts has led to increased immigration to the United States from that country.

Obama presents his first weekly address as President of the United States on January 24, 2009, discussing the American Recovery and Reinvestment Act of 2009
Job Growth by U.S. president, measured as cumulative percentage change from month after inauguration to end of term.
2016 was the first year U.S. real (inflation-adjusted) median household income surpassed 1999 levels.
Non-farm job creation averaged approximately 200,000/month for 73 months from October 2010 to October 2016, a robust rate by historical standards. The unemployment rate fell from 10% to less than 5%. [ 21 ] [ 22 ]
CBO explained that the shortfall in employment relative to a theoretical full employment level fell from nearly 10 million in 2010 to 1.6 million by late 2016. The shortfall was due to excess levels of unemployment and a decline in labor force participation. [ 23 ]
The tier 1 ratio represents the strength of the financial cushion that a bank maintains; the higher the ratio, the stronger the financial position of the bank, other things equal. Dodd–Frank set standards for improving this ratio and has been successful in that regard. [ 2 ]
U.S. changes in household debt as a percentage of GDP for 1989–2016. Recoveries from financial crises tend to be protracted, as debt levels must be reduced before typical borrow-and-spend patterns are resumed. In this case, homeowners paid down debt from 2009 to 2012. [ 24 ]
Several major U.S. economic variables had recovered from the 2007-2009 Subprime mortgage crisis and Great Recession by the 2013-2014 time period.
CBO final estimate of impact of Obama stimulus
Total unemployed people
Total job openings
Quits rate
Republican President
Democratic President
This chart illustrates several aspects of the Affordable Care Act , including number of persons covered, cost before and after subsidies, and public opinion.
Coverage rate, employer market cost trends, budgetary impact, and income inequality aspects of the Affordable Care Act .
The distributional impact of the Affordable Care Act (ACA or Obamacare) during 2014. The ACA raised taxes mainly on the top 1% to fund approximately $600 in benefits on average for the bottom 40% of families.
President Obama signing the Patient Protection and Affordable Care Act into law.
Four CBO charts with revenue, spending, deficit and debt information. The annual budget deficit fell significantly during the Obama administration, although debt relative to the size of the economy increased.
Comparison of CBO 2009 deficit forecasts versus actual results 2009–2016. The deficit was cut by nearly two-thirds, falling from $1.4 trillion in FY2009 to below $500 billion by FY2014. Relative to the size of the economy, it fell each year 2010–2015. [ 86 ]
Three CBO deficit scenarios related to the American Taxpayer Relief Act of 2012 (ATRA) and the Fiscal Cliff. The blue line (August 2012 baseline) was the "current law" baseline, with tax increases and spending cuts that would take effect if laws were not changed. The grey line (March 2012 alternative baseline) was the "current policy" baseline, which represented the avoidance of the tax increases and spending cuts. The orange line (February 2013 baseline) was the post-ATRA result. The vertical black dotted line is the January 2013 date of enactment. [ 87 ]
Comparison of actual U.S. Federal Spending 2008–2015 versus a trend line based on the 5% average annual increase in 1990–2008. Spending was below the trend line starting in 2012.
Comparison of annual federal deficits (CBO 10-year forecast from prior to inauguration vs. the actual amount), during the Obama and G.W. Bush presidencies. Bush added far more to the debt relative to the CBO 2001 forecast than Obama added relative to the CBO 2009 forecast. [ 99 ]
From 2012 to 2013, the average federal tax rate of the top 1% of income earners rose from 28% to 34%, due to tax increases in the ACA and the expiration of the Bush tax cuts for the highest income earners.
Selected economic variables related to wealth and income equality, comparing 1979, 2007, and 2015.
The image contains several charts related to U.S. wealth inequality. While U.S. net worth roughly doubled from 2000 to 2016, the gains went primarily to the wealthy. The share of wealth of the top 1% has increased since the 1970s.
Several major U.S. economic variables during the Great Recession and President Obama's terms in office.
Panel chart showing several economic variables related to household income and net worth
U.S. cumulative real (inflation-adjusted) GDP growth by President. [ 118 ]
Economic scorecard comparing Trump and Obama presidencies. Refer to sources on the detail page.
Sectoral financial balances in U.S. economy 1990–2017. By definition, the three balances must net to zero. During President Obama's tenure, an increase in the private sector surplus due to the Great Recession drove a corresponding government budget deficit. [ 164 ]
Barack Obama delivering a speech at the University of Southern California in support of California Proposition 87
U.S. Senator Barack Obama
Obama supporters at a campaign rally in Austin, Texas , on February 23, 2007. President Obama said he supports universal health care and programs to increase access to education. [ 191 ]