Obama's Economic Policies Since Becoming President

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. Job 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 theirstocks. The problem is insufficient consumer demand. Businesses won't hire until they are more confident demand is sustainable. Obama submitted theAmericans Jobs Act in September 2011. It was criticized for having the same elements as the Stimulus Act, even though those policies worked. Tax Cuts: 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 billionextension 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 regulatedhedge 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. Deficit Spending: 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.

Obama's record-setting of deficit spending was a result of his economic policies as described here. It was also due to record defense spending to support the Afghanistan and Iraq wars. Revenue was much lower than anticipated thanks to slow growth and tax cuts. 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. Obama's Advisers: 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 theEconomic 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.

President Obama's Deficit Reduction Plan

On September 19,. 2011, President Obama presented his detailed plan to reduce the federal deficit, and to pay for his jobs creation bill, The American Jobs Act. Per the President, his deficit reduction plan will achieve "approximately $4.4 trillion in deficit reduction" and pay for "the cost of the American Jobs Act," which is about $447 billion. "This plan cuts $2 in spending for every dollar in new revenues," the President added.

In summary, the President's plan reduces the U.S. deficit with the following federal spending cuts and tax increases, as follows:

Spending cuts in the Budget Control Act (i.e. debt ceiling agreement) - $1.2 trillion Spending cuts to "mandatory" programs as Medicare and Medicaid - $580 billion Drawdown of U.S troops in Afghanistan and Iraq - $1.1 trillion Income tax reform, largely via expiration of Bush tax cuts - $1.5 trillion Interest savings from paydown of federal debt - $430 billion

Total = $4.81 trillion in planned savings for deficit reduction The Politics: Most portions of President Obama's deficit reduction plan are quite attractive to Democrats, especially progressives who opposed Bush tax cuts for the wealthiest Americans and who support drawdown of U.S. troops in Afghanistan and total withdrawal of U.S. troops from Iraq. Many liberals object to Medicare, Medicaid and health care benefit cuts included in Obama's deficit reduction plan. Per recent polling, middle-class and working class Americans will strongly support major portions of the President deficit reduction plan, especially rollback of Bush tax cuts, withdrawal of U.S. troops in the Middle East, and income tax reform that includes additional taxation of the wealthy. This plan, and Obama's fighting for it, could inspire and energize Democrats and middle-class Americans to vote for Obama in 2012. However, this plan stands almost no possibility of being passed into law by Congressional Republicans. President Obama's Deficit Reduction Plan: President Obama's spending cuts of "mandatory" programs and income tax reform increases are briefly described: Spending cuts to "mandatory" programs

"$248 billion in savings from Medicare" mainly from "from reducing overpayments." $72 billion in "Other health and Medicaid savings," some which are duplicates of coverage under Obama's health care reform bill $33 billion in spending cuts from agriculture subsidies and programs $42.5 billion in spending cuts to Federal employee benefit programs, including retired military personnel $92.2 billion in cuts due to "restructuring government operations" 77.6 billion in cuts due to "reducing (federal) waste and abuse"

Comprehensive income tax reform

$866 billion by allowing Bush tax cuts for the wealthiest Americans to expire in 2012 $410 billion by capping deductions taken by Americans more than $250,000 annually

$300 billion by limiting and closing certain "loopholes" and "special interest tax breaks" such as those granted to the oil and gas industry. In setting forth his tax reform criteria, resident Obama beseeched, "... Middle-class families shouldnt pay higher taxes than millionaires and billionaires. Thats pretty straightforward. Its hard to argue against that. Warren Buffetts secretary shouldnt pay a higher tax rate than Warren Buffett. There is no justification for it."

Obama Tax Cuts

n 2010, President Obama signed a $858 billion tax cut deal that extended the Bush tax cuts through 2012 and unemployment benefits through 2011. It cut payroll taxes by 2%, adding $120 million to workers' spendable income. The Obama tax cut deal extended a college tuition tax credit. To partially pay for this, the 35% inheritance tax on the wealthy (estates worth $5 million individuals/$10 million families) was revived after a year-long lapse. It also included $55 billion in industry specific tax cuts. (Source: Washington Post, "Obama, GOP reach deal to extend tax breaks," December 7, 2010) 1. Do Tax Cuts Create Jobs?

All tax cuts are not equal in creating new jobs. (Photo: Tim Boyle/Getty Images)

The Congressional Budget Office(CBO) found that the Bush tax cuts will create 4.6 jobs for every $1 million in cuts, which will be extended for two years. Unemployment benefits? Much better - at 19 jobs for every $1 million in benefits. Both are equally good at increasing the Federal deficit. The CBO study also found that payroll tax cuts, which have been added as part of the negotiation, will create 13 new jobs for every $1 million in cuts. If these employers only get the cuts when they create new jobs, this boosts job creation - to 18 jobs per $1 million. Ads Richardson Economic Devwww.telecomcorridor.comRichardson Economic Development Partnership My Inspired Documentswww.linkedin.comLearn from a schizophrenic who got better. Anti-Obama Bumper Stickerwww.zazzle.com/antiobamaNo Obama in 2012 Gifts & Gear. 1,000+ Designs to choose from. 2. Extended Unemployment Benefits Best Way to Boost Economy

The unemployed spend, not save, their benefits. (Photo: Chris Hondros/Getty Images)

In addition to creating jobs, every dollar spent on unemployment benefits stimulates $1.73 in economic demand, according to an Economy.com study. That's because the unemployed spend every dollar they receive on basic essentials, such as food, clothing and housing. It is estimated that every month benefits are extended costs taxpayers $10 billion. However, it also generates $17.3 billion in economic growth. 3. Details of Bush Tax Cuts President George Bush's tax cuts occurred in 2001 and 2003. President Bush also gave tax refunds in 2008. It saved taxpayers, and increased the debt, by $1.35 trillion over a 10-year period. The Urban Institute said the tax cuts benefited families with children, and those with incomes over $200,000, the most. 4. 2010 Election Results Impact on Economy The 2010 mid-term elections ushered in a Republican majority in the House (a gain of 60 seats), and a new House Majority Leader, John Boehner. Republicans won an additional 6 seats in the Senate, but not the majority. The Republicans said they want to reduce the deficit, keep the Bush tax cuts for everyone and reduce or even eliminate health care reform. This change meant Obama had to become willing to negotiate with the lame duck Congress, enabling the Obama tax cuts to pass before the end of 2010.

5. How Did the U.S. Run Up a $14 Trillion Debt? At $14 trillion, the U.S. debt is the largest in the world. It is nearly equal to total annual economic production. The interest alone is $414 billion (Fiscal Year 2010) How did it get so large? Even before the economic crisis, the debt had grown 50% between 2000-2007, ballooning from $6-$9 trillion. The $700 billion bailout helped the debt grow to $10.5 trillion by December 2008. The economic stimulus package and other stimulus spending added another $3 trillion in two years. 6. Obama's 2009 Economic Stimulus Package The $787 billion economic stimulus package was approved by Congress in February, 2009. The plan was to jump start economic growth, and save between 900,000-2.3 million jobs. The economic stimulus bill allocated funds as follows:

$288 billion in tax cuts. $224 billion in extended unemployment benefits, education and health care. $275 billion for job creation using federal contracts, grants and loans.

7. Details of Obama Economic Stimulus Package The Obama Economic Stimulus Package had seven components, including $260 billion in tax cuts for families, $83 billion in public construction, and $117 billion to improve education. There was also $18 billion in science research funding, $54 billion to help small businesses and $22 billion to increase alternative energy production. Another $138 billion was to fund health care, including $24 billion to subsidize COBRA benefits for laid off workers and $87 billion to help states with Medicaid.

ARRA Details
What Are the Details of the American Recovery and Reinvestment Act?
pdated September 11, 2011

The American Recovery and Reinvestment Act, better known as ARRA, was designed to help the economy recover from the 2008 financial crisis and subsequent recession. Unlike TARP, which helped big business, ARRA was specifically designed to put more money into the pockets of American families and small businesses. Here's the details of each of ARRA's seven components: Immediate Relief for Families The goal was to stimulate demand by redirecting $260 billion in federal funding through tax cuts, tax credits and unemployment benefits. Although the cost was spread out over 10 years, most of it was delivered in the first two years.

Cut taxes by $400 for individuals and $800 for families through reduction of withholding. This caused confusion, since many people expected checks like the Bush Tax Cuts. A payment of an additional $250 each to recipients of Social Security, veterans pension and Supplemental Security Income (SSI) benefits. $70 billion to extend the AMT tax shelter. (This is usually extended each year by Congress, anyway.) Greater access to the child tax credit for the working poor and an expanded earned-income tax credit to families with three children. A $2,500 college tuition tax credit for 2009 and 2010. An $8,000 tax credit for first-time homebuyers in 2009 only. (This was later extended through April 2010.) Deduction of sales tax on new car purchases through 2009 only. Unemployment benefits were extended for another 33 weeks. Suspension of taxes on the first $2,400 of unemployment benefits through 2009. (

Modernize Federal Infrastructure

$46 billion for transportation and mass transit projects. $31 billion to modernize federal buildings. $6 billion in water projects.

Increase Alternative Energy Production

$17 billion in renewable energy tax cuts. $5 billion to weatherize homes.

Expand Health Care

$24 billion to subsidize 65% of COBRA premiums for up to 9 months for laid off workers. $87 billion in matching funds for two years to help states pay for the additional Medicaid needs that usually occur in a recession. $10 billion to National Institute for Health. $17 billion to modernize health information technology systems.

Improve Education

$54 billion to school districts and states to pay for teacher salaries and educational programs. $21 billion for school facility modernization and construction. $17 billion to boost Pell Grants by increasing the maximum to $5,350 in 2009 and $5,550 in 2010. $13 billion for Head Start. $12 billion for special ed programs, including job training for those with disabilities.

Invest in Science Research and Technology

$10 billion to modernize science facilities and fund research jobs that investigate disease cures. $4 billion to increase broadband infrastructure in rural and inner-city areas to make their businesses more competitive. $4 billion for physics and science research.

Help Small Businesses Small businesses drive 70% of all new jobs, so ARRA allocated $54 billion to help small businesses with tax deductions, credits and loan guarantees, including:

Increasing the deduction for machinery and equipment deduction, including SUVs, to $240,000 Allowing a special depreciation deduction for 2008. A capital gains tax cut for small business investors who hold their stock for more than five years. Tax credits for small business that hire long-term unemployed veterans or students Increasing the SBA loan guarantee to 90% in the 7(a) loan program/ Eliminate fees on 504 economic development loans. In the FY 2011 budget, an additional $64 billion in stimulus money was allocated to extend many of the ARRA programs, add tax credits for any new hires, and increase the Small Business Administration loan limits from $3 million to 5$ million

(Source: AP, "Stimulus Package on Track for Final Votes", February 12, 2009; Bloomberg, "Lawmakers Drop Broadband Tax Credit", February 13, 2009; WSJ, "How It Adds Up", February 15, 2009; Guide to U.S. Government, Robert Longley, "Economic Stimulus Package -- How It Could Affect You"; About.com Guide to Small Business, Rosemary Peavler, "Economic Stimulus for

Small Businesses")
Pros and Cons of ARRA As you can see, the American Recovery and Reinvestment Act had something for everybody. However, it was almost too complicated. Many people were unsure whether they, in fact, received a tax break. Polls showed that many others actually thought their taxes had increased, instead of decreased. Small businesses complained that loan guarantees and tax deductions didn't help them when the orders just weren't coming in. Others criticized the focus on education or helping low income families. Some even went so far as to say extended unemployment benefits just helped those without jobs get lazy. However, the success of ARRA is in the numbers. The recession ended three months after it was passed. Economic growth immediately improved: from shrinking a horrifying 6.9% in Q1 to growing a healthy 1.6% by Q3. Instead of losing more than 500,000 jobs a month, the economy has added 2.4 million private sector and 1.7 million government jobs in the last 18 months.