Between the chaotic time when President Barack Obama took office in January 2009 and his final State of the Union address Tuesday, the economy has broadly improved. Fourteen million Americans have found jobs since the Great Recession ended in June 2009, and economic output has risen consistently, if modestly, since then.
But how have Obama’s signature policies affected the economy? From healthcare to financial reform, Republicans have endeavored to block virtually every policy Obama has put forward, often arguing that the economic impacts would be detrimental.
Accordingly, the bulk of the president’s policies — including the Affordable Care Act and the Dodd-Frank financial reform bill — occurred during his first term, before the Republicans took control of Congress. Yet it is still possible to trace the economic impact these policies have had.
Here are three of Obama’s landmark policies and how they affected the economy.
Stimulus and Austerity
Obama came to office in the midst of the worst recession since the Great Depression. Hundreds of thousands of Americans were losing employment every month, and the economy was in freefall.
In 2008, the Bush administration passed an economic stimulus bill the outgoing president called a “booster shot” for the economy. But when Obama took office, he ordered a broader stimulus program of tax cuts, benefits extensions and government investments intended to stave off economic doom, which was signed in 2009.
Many economists today say the bill helped reduce unemployment and lift the sinking economy. In 2014, the University of Chicago reported that 82 percent of leading economists surveyed agreed that Obama’s stimulus reduced the unemployment rate. Only 2 percent disagreed.
Stimulus “greatly reduced the severity of the recession compared to what would have been the case in the absence of fiscal policy,” said Gary Burtless, a senior fellow in economic studies for the Brookings Institution.
But the expansion of federal spending was soon reversed. Newly elected Republicans in Congress sparred to the point of government shutdown over the growing national debt, eventually leading to sequestration, which forced the federal government to essentially cut tens of billions of dollars in planned spending.
Such a turnaround in post-recession spending was unprecedented in the modern era. In the three previous recessions, government spending continued to provide demand in the economy well after the downturn had passed. That was not the case after 2011.
Federal Reserve Chair Janet Yellen has labeled government fiscal policy — namely sequestration — as a “headwind” that kept the economy back after 2011. Compared to previous recoveries, gross domestic product growth has been muted, growing at roughly 2 percent a year compared to 3 percent over the 20 years before the recession.
“At the federal level, the fiscal stimulus of 2008 and 2009 supported economic output, but the effects of that stimulus faded,” Yellen said in a speech last year. “By 2011, federal fiscal policy actions became a drag on output growth when the recovery was still weak.”
Burtless agrees: “Things would have improved much faster had we had more expansionary fiscal policy,” he said. Government investments in roads, bridges, schools and other projects were minimal. “The constraints on fiscal policy means the government has not contributed as much to the economy as much as it could have,” Burtless said.
Politically, the Affordable Care Act (ACA) was a tipping point for the Obama administration, and it remains the policy the president says he’s most proud of.
Economically, the results are less certain.
What is clear: Far fewer Americans are uninsured today than before Obamacare passed, mandating that all working adults secure some form of health insurance. A study by the Centers for Disease Control found that the rate of uninsured has dropped from 15.7 percent before the ACA passed to 9.2 percent in 2015.
The economic knock-on effects have been varied. A recent analysis from the Congressional Budget Office found that repealing the bill would cost the federal government more than $100 billion over a decade. But repeal would also increase economic output by 0.7 percent, the CBO found, as Americans without healthcare subsidies worked more hours to pay for growing healthcare costs.
Another of the bill’s central objectives — reducing healthcare spending — has also found apparent success, though not so clearly as in the uninsured numbers. After around a five years of declining year-over-year growth in federal spending on healthcare, the years after the passage of Obamacare saw healthcare expenditures grow around 4 percent annually, increasing to 5.3 percent in 2014 — largely the result of increased prescription drug costs.
The bill’s detractors warned that the ACA might create unintended consequences. A requirement that employees who work more than 30 hours week be covered by their employers, critics said, might lead businesses to cut hours or hire more part-timers.
Federal jobs data, however, show no increase in part-time employment. In fact, the spike in part-time workers that occurred between 2008 and 2010 has begun to recede ahead of the rule's phase-in during 2015 and 2016. “The evil expected or predicted effects have not materialized in the job market,” Burtless said.
The third of Obama’s major policies did not aim explicitly to expand the economy. In fact, its intent was to rein in a major industry, one that had grown enormously in the preceding decades: finance.
The 2010 Dodd-Frank Act was crafted to reduce the risks posed to the economy by Wall Street, whose spectacular implosion in 2007-2008 precipitated the Great Recession. The sprawling bill forced banks to increase their financial cushions, retreat from riskier lines of business, deal more carefully with exotic financial products and open more of their business up to regulators.
The impact on the largest American banks has been clear. Revenues for the top five lenders — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — have dropped on average since 2010, in large part due to prohibitions on profitable, though risky, trading activities.
Bank of America has cut thousands of jobs since 2011, on a path to trim payrolls by 30,000 employees. JPMorgan CEO Jamie Dimon, who estimated the cost of Dodd-Frank to his bank to be as high as $600 million annually, has said banks were “under assault” from regulators.
Despite shedding jobs, however, Wall Street has kept its employees well-paid. In 2014, the average salary, including bonuses, topped $400,000 — a new record in the industry.