Obamanomics is a buzzword that describes the economic philosophy of U.S President Barack Obama. Obamanomics calls for lower tax rates for companies that meet certain criteria, such as providing decent healthcare and maintaining a U.S. workforce and headquarters. Obama’s economic platform also calls for higher taxes for high-income families and investment in education, healthcare and the sciences.
In general, Obamanomics stands in opposition to supply-side, or “trickle-down,” economics, which holds that people (including the rich) should keep more of what they earn because they will spend that money, promoting economic growth. Obamanomics shares some similarities with Keynesian economics, which states that active government intervention and monetary policy can smooth out bumps in economic cycles and promote stability.
In 2006, Obama wrote: “We should be asking ourselves what mix of policies will lead to a dynamic free market and widespread economic security, entrepreneurial innovation and upward mobility… we should be guided by what works.” Speaking before the National Press Club in April 2005, he defended the New Deal social welfare policies of Franklin D. Roosevelt, associating Republican proposals to establish private accounts for Social Security with Social Darwinism.
Under Obama’s plan, middle-class families would see their income taxes cut, with no family making less than $250,000 seeing an increase. However, he did vote for a budget in June 2008, that would raise the taxes on single people with a taxable income of over $32,000 by pushing up their tax bracket from 25% to 28%. Obama has proposed a tax plan which includes tax credits to lower the amount of taxes paid. It is argued that the typical middle-class family would receive over $1,000 in tax relief, with tax payments that are 20% lower than they faced under President Ronald Reagan. According to the Tax Policy Center, the Obama plan provides three times as much tax relief for middle-class families as the McCain plan. Obama’s plan includes a temporary “Making Work Pay” program, which gives a tax credit at 6.2% of earned income up to $400 for single workers (making less than $75,000/yr), and an $800 for married couples (making less than $150,000/yr), expiring at the end of 2010; this is claimed on Schedule M of Form 1040. Families making more than $250,000 would pay either the same or lower income tax rates than they paid in the 1990s, leaving no family to pay higher income tax rates than they would have paid in the 1990s. For the wealthiest 2% of families, Obama plans to reverse a portion of the tax cuts they have received over the past eight years. Dividend rates would be 39 percent lower than what President George W. Bush proposed in his 2001 tax cut.Business frameworks like Obamanomics are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.