Obama Says U.S. Can’t Afford ‘Bubble-and-Bust’ Cycles (Update4)
By Kim Chipman
March 12 (Bloomberg) -- President Barack Obama warned a group of chief executive officers that the U.S. can’t continue with “endless cycles of bubble and bust” and must build a new foundation for future economic growth.
The financial markets crisis is only part of the challenge to the U.S. economy, Obama told the Washington-based Business Roundtable today.
The current turmoil can’t be used “as an excuse to keep ignoring the long-term threats to our prosperity” from the rising costs of health care and energy and a faltering education system, Obama said to the group, which is made up of CEOs from U.S. companies including Citigroup Inc., Exxon Mobil Corp. and General Motors Corp.
Obama is campaigning to maintain public support for his economic strategy, which includes new government spending as part of a $787 billion stimulus plan and stabilizing the banking industry and housing, as well as tackling the health-care system, energy and education. He also is defending his plans against critics among congressional Republicans and some Democrats.
‘Fundamental’ to Growth
“I’m not choosing to address these additional challenges just because I feel like it, or because I’m a glutton for punishment,” Obama told the business leaders. “I’m doing so because they are fundamental to our economic growth and to ensuring that we don’t have more crises like this in the future.”
The industries represented at the meeting ranged from financial services to pharmaceuticals to oil companies and automakers. Among the executives in attendance were Anne Mulcahy, CEO of Xerox Corp., Sam Palmisano, CEO of International Business Machines Corp., and Ivan Seidenberg, CEO of Verizon Communications Inc.
The U.S. has lost 4.4 million jobs since the recession began in December 2007, according to Labor Department figures, and the unemployment rate jumped to 8.1 percent in February, the highest level in more than a quarter century. Meanwhile, household wealth in the U.S. fell by a record $5.1 trillion in the last quarter of 2008 as home values and stock prices plunged, according to the Federal Reserve.
Obama blamed the crisis on “reckless speculation and spending beyond our means; on bad credit and inflated home prices and overleveraged banks.”
‘Illusion of Prosperity’
“Such activity isn’t the creation of lasting wealth,” he said. “It’s the illusion of prosperity, and it hurts us all in the end.”
He said that dealing with the bad assets held by banks and unlocking credit markets are “top” priorities for his administration.
He likened the initiatives outlined in his $3.55 trillion fiscal 2010 budget plan to projects by past presidents to build a transcontinental railroad, the interstate highway system and the space program.
Such plans aren’t intended to supplant private enterprise, Obama said. Rather, they are designed “to spur commerce and industry,” he said.
Obama said he wants to discuss lowering corporate tax rates “over time” in exchange for “closing a lot of the loopholes that make the tax system so complex.”
New Regulations
He promised his plans for revamping financial regulations won’t “strangle” the flow of private capital and that he’ll seek “global coordination” on a new framework when he meets with other leaders of the Group of 20 nations April 2 in London.
“When he left the room people felt better about him and his administration,” said William Green, CEO of Hamilton, Bermuda- based Accenture Ltd., the world’s second largest technology- consulting firm. The executives “genuinely want him to be successful.”
Obama’s emphasis on improving education and taming health- care costs were particularly important to the group, Green said.
Obama’s health-care plans also came up in the Senate today, where it drew criticism from lawmakers of both parties.
The Democratic chairman of the Budget Committee questioned Obama’s proposal, contained in his 2010 budget, to put $634 billion into revamping the U.S. health-care system.
“This is an area that gives many of us great pause, because we are already spending one in every six dollars in this economy on health care,” Senator Kent Conrad of North Dakota Democrat said at a hearing. “We’ve already got a bloated system.”
Senator Judd Gregg of New Hampshire, the ranking Republican on the committee, said Obama’s plan would significantly increase U.S. spending on health care “which already exceeds any other industrialized country in the world by about 5 percent.”
In addition, the group also heard from Education Secretary Arne Duncan and Treasury Secretary Timothy Geithner.
Green of Accenture lauded the program. “We were where business people need to go. This isn’t about theater, this is about facts,” he said.
To contact the reporter on this story: Kim Chipman in Washington at kchipman@bloomberg.net.
Last Updated: March 12, 2009 18:59 EDT |
