# Obamanomics: What It Means, How It Works

## What Is Obamanomics?

Obamanomics describes the economic policies of the administration of former President Barack Obama, with the term combining "Obama" and "economics." The term is commonly associated with the tax policies, healthcare reforms, and economic stimulus programs enacted by the Obama Administration in response to the [Great Recession of 2008](https://www.investopedia.com/terms/g/great-recession.asp).

### Key Takeaways

*   Obamanomics refers to the economic policies of former U.S. President Barack Obama.
*   The term is often associated with the stimulus programs used to combat the Great Recession.
*   Examples of these policies include the 2009 American Recovery and Reinvestment Act, which was an $831 billion economic stimulus package, and the 2009 bailout of the U.S. automobile industry.
*   Critics of Obamanomics view it as representing an undue expansion of the government’s economic role, including increased government spending, taxation, and regulation.
*   It is often contrasted with Reaganomics, another popular term referring to the economic policies of former President Ronald Reagan.

## Understanding Obamanomics

As is often the case in politics, the precise connotations of Obamanomics will depend on the political views of the commentator in question. Those who favor a more [activist role in the economy](https://www.investopedia.com/search?q=mixed+economy) for the federal government to protect the economic interests of Americans may view the term neutrally or even with approval. Those who prefer less federal involvement in picking winners and losers in the economy and interfering with the [economic efficiency](https://www.investopedia.com/terms/e/economic_efficiency.asp) of free markets may view the term, and the policies it represents, unfavorably.

For supporters of Obamanomics, the term is often associated with a favorable view of the [Obama Administration](https://www.investopedia.com/news/obamas-economic-legacy-8-charts/)’s [economic stimulus](https://www.investopedia.com/terms/e/economic-stimulus.asp) policies. Examples of these policies include the 2009 passage of the [American Recovery and Reinvestment Act](https://www.investopedia.com/terms/a/american-recovery-and-reinvestment-act.asp), (ARRA) which was an $831 billion economic stimulus package; and the 2009 bailout of the U.S. automobile industry, which was on the verge of collapse at that time. Many Obama supporters view him in heroic terms, as one who saved the economy from certain doom by implementing this [economic stimulus](https://www.investopedia.com/terms/e/economic-stimulus.asp) agenda.

Other notable policies associated with Obamanomics include the raising of income taxes on high-income earners; the imposition of a cap, or “[sequester](https://www.investopedia.com/terms/s/sequestration.asp),” on military and discretionary spending; and the passage of the [2010 Patient Protection and Affordable Care Act](https://www.investopedia.com/terms/a/affordable-care-act.asp) (ACA), also known as Obamacare.

To detractors, the term Obamanomics has connotations of increased government spending, taxation, and regulation, and a dangerous slide toward [socialism](https://www.investopedia.com/terms/s/socialism.asp) and a [command economy](https://www.investopedia.com/terms/c/command-economy.asp). In effect, Obama’s critics view Obamanomics as an unwelcome expansion of the role of government in the economy. In this manner, Obamanomics can be contrasted with [Reaganomics](https://www.investopedia.com/terms/r/reaganomics.asp), which refers to the economic policies of ex-President Ronald Reagan. While Obamanomics is associated with an expanded government role, Reaganomics is associated with lower taxes, decreased government spending, and fewer regulations.

> **Important**
>
> While some commentators use the term Obamanomics in a positive or negative light, many use it to simply refer to the economic policies of President Obama, without any necessarily positive or negative connotations.

## Obamanomics and the ARRA

Supporters of Obamanomics claim that the dire financial situation of the U.S. economy that greeted Obama when he was elected in 2008 necessitated a strong government response. These circumstances included a soaring [fiscal deficit](https://www.investopedia.com/terms/f/fiscaldeficit.asp), collapsing housing market, tumbling stock market, fears of a banking-sector collapse following the bankruptcy of [Lehman Brothers](https://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp), and dramatic job losses.

Obama’s signature response to these issues was the quintessential stimulus act, the ARRA, which increased government spending by over $800 billion for the decade spanning 2009 through 2019. The ARRA is an example of [Keynesian economic theory](https://www.investopedia.com/terms/k/keynesianeconomics.asp), which includes the concept of government [deficit spending](https://www.investopedia.com/terms/d/deficit-spending.asp) as a way to stimulate economic [aggregate demand](https://www.investopedia.com/terms/a/aggregatedemand.asp) and reduce unemployment through the [multiplier effect](https://www.investopedia.com/terms/m/multipliereffect.asp).

Supporters claimed that the spending was focused on preserving and creating jobs that were threatened by the financial crisis underway at that time, while also investing in areas such as health, education, and civil infrastructure.  However, Harvard economist N. Gregory Mankiw and other critics later pointed out that the ARRA appeared to have had the opposite effect, and actually increased unemployment relative to the benchmarks projected by the Act's proponents, by [crowding out](https://www.investopedia.com/terms/c/crowdingouteffect.asp) private investment and other economic mechanisms.

> **Article Sources**
>
> 1.  Wall Street Journal. "[Obamanomics Isn't About Big Government](https://www.wsj.com/articles/SB123819895769662043),". Accessed August 3, 2021.
>     
> 2.  The Washingtom Times. "[Barbara Walters admits ‘we’ thought Obama was ‘the next messiah’,](https://www.washingtontimes.com/news/2013/dec/18/barbara-walters-admits-we-thought-obama-was-next-m/)". Accessed August 3, 2021.
>     
> 3.  E! Online. "[Jamie Foxx Calls Barack Obama "Our Lord and Savior" at Soul Train Awards, Catholic Group Fires Back](https://www.eonline.com/news/366114/jamie-foxx-calls-barack-obama-our-lord-and-savior-at-soul-train-awards),". Accessed August 3, 2021.
>     
> 4.  Forbes. "[Reaganomics Vs Obamanomics](https://www.forbes.com/sites/peterferrara/2011/05/05/reaganomics-vs-obamanomics-facts-and-figures/?sh=2f8060849ac9),". Accessed August 3, 2021.
>     
> 5.  Greg Mankiw's Blog. "[Unemployment Update](https://gregmankiw.blogspot.com/2010/01/unemployment-update.html),". Accessed August 3, 2021.