How Obama's Policies Will Affect Your Wallet

Now it’s official. Sen. Barack Obama (D., Ill.) will be the 44th president of the United States. So how will it affect your finances?

Some changes could come quickly. Obama is expected to choose his White House staff soon – possibly today – and begin charting a course for his early days in office. Clearly, Obama has many hurdles to confront: some 47 million uninsured Americans, record-high foreclosures, high energy costs and a shrinking middle-class.

The political calculus isn’t just about the presidency, of course. The Democrats have widened their majority in Congress with 56 seats in the Senate and 253 in the House. Republicans won 41 and 173 seats, respectively. That Democratic majority may be just the boost Obama needs to pass many of his key initiatives, most notably health care, says Dean Baker, co-director at the nonpartisan Center for Economic and Policy Research in Washington, D.C.

"He's very well situated and I bet a lot of his proposals will have popular support in Congress," says Baker. "He conceivably could have some of his proposals pass before he's in office during the lame duck session. I'm sure he and Speaker Nancy Pelosi will jointly decide what they can work on that fits Obama’s larger agenda that President Bush would be prepared to sign before he leaves office."

Here's an overview of Obama's proposals and their likely effects on consumers, should they unfold as he outlined during the campaign.

Under Obama's health-care proposals, private insurance will still exist, and a public system, subsidized by the government, would emerge.

Under the plan, those who have health insurance can keep their existing coverage and those who want a new health-insurance plan or those who are uninsured will be able to purchase a health-care plan through a National Health Insurance Exchange. Those who can't afford to purchase the coverage will be given a tax credit. (The Tax Policy Center expects that families with income above 400% of poverty will not receive a subsidy.) The National Health Insurance Exchange will offer a range of private insurance policies as well as a new public health plan that offers benefits similar to what members of Congress get, including preventive, maternity and mental health care.

Of course, offering public coverage and tax credits will cost money. Obama has said he would fund his plan in two ways. First, he has said he won't renew the Bush tax cuts for people who make more than $250,000 a year. Also, companies (excluding small businesses) that don't contribute to the cost of their employees' health coverage will be required to allocate a percentage of their payroll toward this national health plan. Obama says he will offer a refundable tax credit to small businesses that cover up to 50% of the health-insurance premiums they pay for their employees.

Parents would also be required to obtain health insurance for their children. TPC projects that 95% of uninsured children will gain coverage from this plan. While Obama’s plan would increase coverage, it would still leave about 6% of the elderly population uninsured, according to the Urban Institute Health Policy Center. In addition, Obama’s plan can increase costs to some businesses, which could ultimately lead to lower wages or layoffs within some — although few — companies, said the Center for Economic and Policy Research’s Baker.

Obama also says he plans to increase government regulation of the insurance industry and prohibit insurance companies from rejecting applicants because of their health status and discriminating against them with higher premiums.