The U.S. economy has changed drastically since Sen. Barack Obama hit the campaign trail nearly two years ago.
Now, will the president-elect be able to keep all his promises, or will some of them have to be put on the shelf until the economy improves? And how will the Democrat-controlled Congress, with an even bigger majority, shape the new president's agenda?
Don't expect health care reform and a Social Security fix to be tackled right away. Right now, it's all about the economy.
Here are some financial changes you'll likely see between now and the end of President Obama's first year in office:
Stimulus package : Expect a $150 billion to $300 billion economic package that could pass even before Obama is inaugurated, says Stuart Hoffman, chief economist with PNC Financial Services Group.
Don't count on another round of stimulus checks like the ones earlier this year, though.
"It was not considered very effective," Hoffman says. "It was like a sugar high. People spent the money, but as soon as the tax [rebates] stopped coming in ... spending fell again."
A new package will target spending on things that will have a longer-term impact. That includes money to cash-strapped states and local governments to build infrastructure, such as roads and bridges, which would create jobs.
Congress also might increase food stamp benefits or extend unemployment benefits to 52 weeks.
Income taxes : Raising taxes on those earning more than $250,000 is a campaign promise Obama is likely to keep. Today's top tax bracket of 35 percent, for example, would return to 39.6 percent, the rate during the Clinton administration.
High-income investors also can expect to see an increase in the current 15 percent tax rate on capital gains and dividend income. The rate on long-term gains could go up to 20 percent. Dividend income might be taxed at that same rate or go back to being taxed as regular income, which means as high as 39.6 percent.
Kenneth Kies, managing director of the lobbying firm Federal Policy Group, expects major tax legislation in the first eight months of the new administration while Obama is still in the honeymoon phase. Tax increases could be retroactive to the start of the year, he says.
It's a myth in Washington that Congress won't raise taxes during a recession, Kies said during a Webcast last week sponsored by InvestmentNews.
