Remarks of President Barack Obama
A New Foundation
Tuesday, April 14th, 2009
Washington, DC
i.usatoday.net
THE WHITE HOUSE
Office of the Press Secretary
Remarks of President Barack Obama
A New Foundation
Tuesday, April 14th, 2009
Washington, DC
As Prepared for Delivery
It has now been twelve weeks since my administration
began. And I think even our critics would agree that at
the very least, we’ve been busy. In just under three
months, we have responded to an extraordinary set of
economic challenges with extraordinary action – action that
has been unprecedented in both its scale and its speed.
I know that some have accused us of taking on too much at
once. Others believe we haven’t done enough. And many
Americans are simply wondering how all of our different
programs and policies fit together in a single, overarching
strategy that will move this economy from recession to
recovery and ultimately to prosperity.
So today, I want to step back for a moment and explain our
strategy as clearly as I can. I want to talk about what
we’ve done, why we’ve done it, and what we have left to
do. I want to update you on the progress we’ve made, and
be honest about the pitfalls that may lie ahead.
And most of all, I want every American to know that each
action we take and each policy we pursue is driven by a
larger vision of America’s future – a future where
sustained economic growth creates good jobs and rising
incomes; a future where prosperity is fueled not by
excessive debt, reckless speculation, and fleeing profit,
but is instead built by skilled, productive workers; by
sound investments that will spread opportunity at home and
allow this nation to lead the world in the technologies,
innovations, and discoveries that will shape the 21st
century. That is the America I see. That is the future I
know we can have.
To understand how we get there, we first need to understand
how we got here.
Recessions are not uncommon. Markets and economies
naturally ebb and flow, as we have seen many times in our
history. But this recession is different. This recession
was not caused by a normal downturn in the business cycle.
It was caused by a perfect storm of irresponsibility and
poor decision-making that stretched from Wall Street to
Washington to Main Street.
As has been widely reported, it started in the housing
market. During the course of the decade, the formula for
buying a house changed: instead of saving their pennies to
buy their dream house, many Americans found they could take
out loans that by traditional standards their incomes just
could not support. Others were tricked into signing these
subprime loans by lenders who were trying to make a quick
profit. And the reason these loans were so readily
available was that Wall Street saw big profits to be made.
Investment banks would buy and package together these
questionable mortgages into securities, arguing that by
pooling the mortgages, the risks had been reduced. And
credit agencies that are supposed to help investors
determine the soundness of various investments stamped the
securities with their safest rating when they should have
been labeled “Buyer Beware.”
No one really knew what the actual value of these
securities were, but since the housing market was booming
and prices were rising, banks and investors kept buying and
selling them, always passing off the risk to someone else
for a greater profit without having to take any of the
responsibility. Banks took on more debt than they could
handle. The government-chartered companies Fannie Mae and
Freddie Mac, whose traditional mandate was to help support
traditional mortgages, decided to get in on the action by
buying and holding billions of dollars of these
securities. AIG, the biggest insurer in the world, decided
to make profits by selling billions of dollars of
complicated financial instruments that supposedly insured
these securities. Everybody was making record profits –
except the wealth created was real only on paper. And as
the bubble grew, there was almost no accountability or
oversight from anyone in Washington.
Then the housing bubble burst. Home prices fell. People
began defaulting on their subprime mortgages. The value of
all those loans and securities plummeted. Banks and
investors couldn’t find anyone to buy them. Greed gave way
to fear. Investors pulled their money out of the market.
Large financial institutions that didn’t have enough money
on hand to pay off all their obligations collapsed. Other
banks held on tight to the money they did have and simply
stopped lending.
This is when the crisis spread from Wall Street to Main
Street. After all, the ability to get a loan is how you
finance the purchase of everything from a home to a car to
a college education. It’s how stores stock their shelves,
farms buy equipment, and businesses make payroll. So when
banks stopped lending money, businesses started laying off
workers. When laid off workers had less money to spend,
businesses were forced to lay off even more workers. When
people couldn’t get car loans, a bad situation at the auto
companies became even worse. When people couldn’t get home
loans, the crisis in the housing market only deepened.
Because the infected securities were being traded worldwide
and other nations also had weak regulations, this recession
soon became global. And when other nations can’t afford to
buy our goods, it slows our economy even further.
This is the situation we confronted on the day we took
office. And so our most urgent task has been to clear away
the wreckage, repair the immediate damage to the economy,
and do everything we can to prevent a larger collapse. And
since the problems we face are all working off each other
to feed a vicious economic downturn, we’ve had no choice
but to attack all fronts of our economic crisis at once.
The first step was to fight a severe shortage of demand in
the economy. The Federal Reserve did this by dramatically
lowering interest rates last year in order to boost
investment. And my administration and Congress boosted
demand by passing the largest recovery plan in our nation’s
history. It’s a plan that is already in the process of
saving or creating 3.5 million jobs over the next two
years. It is putting money directly in people’s pockets
with a tax cut for 95% of working families that is now
showing up in paychecks across America. And to cushion the
blow of this recession, we also provided extended
unemployment benefits and continued health care coverage to
Americans who have lost their jobs through no fault of
their own.
Now, some have argued that this recovery plan is a case of
irresponsible government spending; that it is somehow to
blame for our long-term deficit projections, and that the
federal government should be cutting instead of increasing
spending right now. So let me tackle this argument head
on.
To begin with, economists on both the left and right agree
that the last thing a government should do in the middle of
a recession is to cut back on spending. You see, when this
recession began, many families sat around their kitchen
table and tried to figure out where they could cut back.
So do many businesses. That is a completely responsible
and understandable reaction. But if every family in
America cuts back, then no one is spending any money, which
means there are more layoffs, and the economy gets even
worse. That’s why the government has to step in and
temporarily boost spending in order to stimulate demand.
And that’s exactly what we’re doing right now.
Second of all, I absolutely agree that our long-term
deficit is a major problem that we have to fix. But the
fact is that this recovery plan represents only a tiny
fraction of that long-term deficit. As I will discuss in a
moment, the key to dealing with our deficit and debt is to
get a handle on out-of-control health care costs – not to
stand idly by as the economy goes into free fall.
So the recovery plan has been the first step in confronting
this economic crisis. The second step has been to heal our
financial system so that credit is once again flowing to
the businesses and families who rely on it.
The heart of this financial crisis is that too many banks
and other financial institutions simply stopped lending
money. In a climate of fear, banks were unable to replace
their losses by raising new capital on their own, and they
were unwilling to lend the money they did have because they
were afraid that no one would pay it back. It is for this
reason that the last administration used the Troubled Asset
Relief Program, or TARP, to provide these banks with
temporary financial assistance in order to get them lending
again.
Now, I don’t agree with some of the ways the TARP program
was managed, but I do agree with the broader rationale that
we must provide banks with the capital and the confidence
necessary to start lending again. That is the purpose of
the stress tests that will soon tell us how much additional
capital will be needed to support lending at our largest
banks. Ideally, these needs will be met by private
investors. But where this is not possible, and banks
require substantial additional resources from the
government, we will hold accountable those responsible,
force the necessary adjustments, provide the support to
clean up their balance sheets, and assure the continuity of
a strong, viable institution that can serve our people and
our economy.
Of course, there are some who argue that the government
should stand back and simply let these banks fail –
especially since in many cases it was their bad decisions
that helped create the crisis in the first place. But
whether we like it or not, history has repeatedly shown
that when nations do not take early and aggressive action
to get credit flowing again, they have crises that last
years and years instead of months and months – years of low
growth, low job creation, and low investment that cost
those nations far more than a course of bold, upfront
action. And although there are a lot of Americans who
understandably think that government money would be better
spent going directly to families and businesses instead of
banks – “where’s our bailout?,” they ask – the truth is
that a dollar of capital in a bank can actually result in
eight or ten dollars of loans to families and businesses, a
multiplier effect that can ultimately lead to a faster pace
of economic growth.
On the other hand, there have been some who don’t dispute
that we need to shore up the banking system, but suggest
that we have been too timid in how we go about it. They
say that the federal government should have already
preemptively stepped in and taken over major financial
institutions the way that the FDIC currently intervenes in
smaller banks, and that our failure to do so is yet another
example of Washington coddling Wall Street. So let me be
clear – the reason we have not taken this step has nothing
to do with any ideological or political judgment we’ve made
about government involvement in banks, and it’s certainly
not because of any concern we have for the management and
shareholders whose actions have helped cause this mess.
Rather, it is because we believe that preemptive government
takeovers are likely to end up costing taxpayers even more
in the end, and because it is more likely to undermine than
to create confidence. Governments should practice the same
principle as doctors: first do no harm. So rest assured –
we will do whatever is necessary to get credit flowing
again, but we will do so in ways that minimize risks to
taxpayers and to the broader economy. To that end, in
addition to the program to provide capital to the banks, we
have launched a plan that will pair government resources
with private investment in order to clear away the old
loans and securities – the so-called toxic assets – that
are also preventing our banks from lending money.
Now, what we’ve also learned during this crisis is that our
banks aren’t the only institutions affected by these toxic
assets that are clogging the financial system. A.I.G., for
example, is not a bank. And yet because it chose to insure
trillions of dollars worth of risky assets, its failure
could threaten the entire financial system and freeze
lending even further. This is why, as frustrating as it is
– and I promise you, nobody is more frustrated than me –
we’ve had to provide support for A.I.G. It’s also why we
need new legal authority so that we have the power to
intervene in such financial institutions, just like a
bankruptcy court does with businesses that hit hard times,
so that we can restructure these businesses in an orderly
way that does not induce panic – and can restructure
inappropriate bonus contracts without creating a perception
that government can just change compensation rules on a
whim.
This is also why we’re moving aggressively to unfreeze
markets and jumpstart lending outside the banking system,
where more than half of all lending in America actually
takes place. To do this, we’ve started a program that will
increase guarantees for small business loans and unlock the
market for auto loans and student loans. And to stabilize
the housing market, we’ve launched a plan that will save up
to four million responsible homeowners from foreclosure and
help many millions more re-finance.
In a few weeks, we will also reassess the state of Chrysler
and General Motors, two companies with an important place
in our history and a large footprint in our economy – but
two companies that have also fallen on hard times.
Late last year, the companies were given transitional loans
by the previous administration to tide them over as they
worked to develop viable business plans. But the plans
they developed fell short, and so we have given them some
additional time to work these complex issues through. We
owed that, not to the executives whose bad bets contributed
to the weakening of their companies, but to the hundreds of
thousands of workers whose livelihoods hang in the balance.
It is our fervent hope that in the coming weeks, Chrysler
will find a viable business partner and that GM will
develop a business plan that will put it on a path to
profitability without endless support from the American
taxpayer. In the meantime, we are taking steps to spur
demand for American cars and provide relief to autoworkers
and their communities. And we will continue to reaffirm
this nation’s commitment to a 21st century American auto
industry that creates new jobs and builds the fuelefficient
cars and trucks that will carry us toward a clean
energy future.
Finally, to coordinate a global response to this global
recession, I went to the meeting of the G20 nations in
London the other week. Each nation has undertaken
significant stimulus to spur demand. All agreed to pursue
tougher regulatory reforms. We also agreed to triple the
lending capacity of the International Monetary Fund, an
international financial institution supported by all the
major economies, and provide direct assistance to
developing nations and vulnerable populations – because
America’s success depends on whether other nations have the
ability to buy what we sell. We pledged to avoid the trade
barriers and protectionism that hurts us all in the end.
And we decided to meet again in the fall to gauge our
progress and take additional steps if necessary.
So all of these actions – the Recovery Act, the bank
capitalization program, the housing plan, the strengthening
of the non-bank credit market, the auto plan, and our work
at the G20 – have been necessary pieces of the recovery
puzzle. They have been designed to increase aggregate
demand, get credit flowing again to families and
businesses, and help them ride out the storm. And taken
together, these actions are starting to generate signs of
economic progress. Because of our recovery plan, schools
and police departments have cancelled planned layoffs.
Clean energy companies and construction companies are rehiring
workers to build everything from energy efficient
windows to new roads and highways. Our housing plan has
helped lead to a spike in the number of homeowners who are
taking advantage of historically-low mortgage rates by
refinancing, which is like putting a $2,000 tax cut in your
in pocket. Our program to support the market for auto
loans and student loans has started to unfreeze this market
and securitize more of this lending in the last few weeks.
And small businesses are seeing a jump in loan activity for
the first time in months.
This is all welcome and encouraging news, but it does not
mean that hard times are over. 2009 will continue to be a
difficult year for America’s economy. The severity of this
recession will cause more job loss, more foreclosures, and
more pain before it ends. The market will continue to rise
and fall. Credit is still not flowing nearly as easily as
it should. The process for restructuring AIG and the auto
companies will involve difficult and sometimes unpopular
choices. All of this means that there is much more work to
be done. And all of this means that you can continue to
expect an unrelenting, unyielding, day-by-day effort from
this administration to fight for economic recovery on all
fronts.
But even as we continue to clear away the wreckage and
address the immediate crisis, it is my firm belief that our
next task is to make sure such a crisis never happens
again. Even as we clean up balance sheets and get credit
flowing; even as people start spending and business start
hiring – we have to realize that we cannot go back to the
bubble and bust economy that led us to this point.
It is simply not sustainable to have a 21st century
financial system that is governed by 20th century rules and
regulations that allowed the recklessness of a few to
threaten the entire economy. It is not sustainable to have
an economy where in one year, 40% of our corporate profits
came from a financial sector that was based too much on
inflated home prices, maxed out credit cards, overleveraged
banks and overvalued assets; or an economy where the
incomes of the top 1% have skyrocketed while the typical
working household has seen their income decline by nearly
$2,000.
For even as too many were chasing ever-bigger bonuses and
short-term profits over the last decade, we continued to
neglect the long-term threats to our prosperity: the
crushing burden that the rising cost of health care is
placing on families and businesses; the failure of our
education system to prepare our workers for a new age; the
progress that other nations are making on clean energy
industries and technologies while we remain addicted to
foreign oil; the growing debt that we’re passing on to our
children. And even after we emerge from the current
recession, these challenges will still represent major
obstacles that stand in the way of our success in the 21st
century.
There is a parable at the end of the Sermon on the Mount
that tells the story of two men. The first built his house
on a pile of sand, and it was destroyed as soon as the
storm hit. But the second is known as the wise man, for
when “…the rain descended, and the floods came, and the
winds blew, and beat upon that house…it fell not: for it
was founded upon a rock.”
We cannot rebuild this economy on the same pile of sand.
We must build our house upon a rock. We must lay a new
foundation for growth and prosperity – a foundation that
will move us from an era of borrow and spend to one where
we save and invest; where we consume less at home and send
more exports abroad.
It’s a foundation built upon five pillars that will grow
our economy and make this new century another American
century: new rules for Wall Street that will reward drive
and innovation; new investments in education that will make
our workforce more skilled and competitive; new investments
in renewable energy and technology that will create new
jobs and industries; new investments in health care that
will cut costs for families and businesses; and new savings
in our federal budget that will bring down the debt for
future generations. That is the new foundation we must
build. That must be our future – and my Administration’s
policies are designed to achieve that future.
The first step we will take to build this foundation is to
reform the outdated rules and regulations that allowed this
crisis to happen in the first place. It is time to lay
down tough new rules of the road for Wall Street to ensure
that we never find ourselves here again. Rules that punish
short-cuts and abuse. Rules that tie someone’s pay to
their actual job performance. Rules that protect typical
American families when they buy a home, get a credit card
or invest in a 401k. We have already begun to work with
Congress to shape this new regulatory framework – and I
expect a bill to arrive on my desk for signature before the
year is out.
The second pillar of this new foundation is an education
system that finally prepares our workers for a 21st century
economy. In the 20th century, the GI Bill sent a generation
to college, and for decades, we led the world in education
and economic growth. But in this new economy, we trail the
world’s leaders in graduation rates and achievement. That
is why we have set a goal that will greatly enhance our
ability to compete for the high-wage, high-tech jobs of the
21st century: by 2020, America will once more have the
highest proportion of college graduates in the world.
To meet that goal, we have already dramatically expanded
early childhood education. We are investing in innovative
programs that have proven to help schools meet high
standards and close achievement gaps. We are creating new
rewards tied to teacher performance and new pathways for
advancement. I have asked every American to commit to at
least one year or more of higher education or career
training, and we have provided tax credits to make a
college education more affordable for every American.
The third pillar of this new foundation is to harness the
renewable energy that can create millions of new jobs and
new industries. We all know that the country that
harnesses this energy will lead the 21st century. Yet we
have allowed other countries to outpace us on this race to
the future.
Well, I do not accept a future where the jobs and
industries of tomorrow take root beyond our borders. It is
time for America to lead again.
The investments we made in the Recovery Act will double
this nation’s supply of renewable energy in the next three
years. And we are putting Americans to work making our
homes and buildings more efficient so that we can save
billions on our energy bills and grow our economy at the
same time.
But the only way to truly spark this transformation is
through a gradual, market-based cap on carbon pollution, so
that clean energy is the profitable kind of energy. Some
have argued that we shouldn’t attempt such a transition
until the economy recovers, and they are right that we have
to take the costs of transition into account. But we can
no longer delay putting a framework for a clean energy
economy in place. If businesses and entrepreneurs know
today that we are closing this carbon pollution loophole,
they will start investing in clean energy now. And pretty
soon, we’ll see more companies constructing solar panels,
and workers building wind turbines, and car companies
manufacturing fuel-efficient cars. Investors will put some
money into a new energy technology, and a small business
will open to start selling it. That’s how we can grow this
economy, enhance our security, and protect our planet at
the same time.
The fourth pillar of the new foundation is a 21st century
health care system where families, businesses, and
government budgets aren’t dragged down by skyrocketing
insurance premiums.
One and a half million Americans could lose their homes
this year just because of a medical crisis. Major American
corporations are struggling to compete with their foreign
counterparts, and small businesses are closing their
doors. We cannot allow the cost of health care to strangle
our economy any longer.
That’s why our Recovery Act will invest in electronic
health records with strict privacy standards that will save
money and lives. We’ve also made the largest investment
ever in preventive care, because that is one of the best
ways to keep costs under control. And included in the
budgets that just passed Congress is an historic commitment
to reform that will finally make quality health care
affordable for every American. So I look forward to
working with both parties in Congress to make this reform a
reality in the coming months.
Fixing our health care system will certainly require
resources, but in my budget, we’ve made a commitment to
fully pay for reform without increasing the deficit, and
we’ve identified specific savings that will make the health
care system more efficient and reduce costs for us all.
In fact, we have undertaken an unprecedented effort to find
this kind of savings in every corner of the budget, because
the final pillar in building our new foundation is
restoring fiscal discipline once this economy recovers.
Already, we have identified two trillion dollars in
deficit-reductions over the next decade. We have announced
procurement reform that will greatly reduce no-bid
contracts and save the government $40 billion. Secretary
Gates recently announced a courageous set of reforms that
go right at the hundreds of billions of dollars in waste
and cost overruns that have bloated our defense budget
without making America safer. We will end education
programs that don’t work, and root out waste, fraud, and
abuse in our Medicare program.
Altogether, this budget will reduce discretionary spending
for domestic programs as share of the economy by more than
10% over the next decade to the lowest level since we began
keeping records nearly half a century ago. And as we
continue to go through the federal budget line by line, we
will be announcing additional savings, secured by
eliminating and consolidating programs we don’t need so
that we can make room for the things we do need.
Now, I realize that for some, this isn’t enough. I know
there is a criticism out there that my administration has
somehow been spending with reckless abandon, pushing a
liberal social agenda while mortgaging our children’s
future.
Well let me make three points.
First, as I said earlier, the worst thing that we could do
in a recession this severe is to try to cut government
spending at the same time as families and businesses around
the world are cutting back on their spending. So as
serious as our deficit and debt problems are – and they are
very serious – major efforts to deal with them have to
focus on the medium and long-term budget picture.
Second, in tackling the deficit issue, we simply cannot
sacrifice the long-term investments that we so desperately
need to generate long-term prosperity. Just as a cashstrapped
family may cut back on luxuries but will insist on
spending money to get their children through college, so we
as a country have to make current choices with an eye on
the future. If we don’t invest now in renewable energy or
a skilled workforce or a more affordable health care
system, this economy simply won’t grow at the pace it needs
to in two or five or ten years down the road. If we don’t
lay this new foundation, it won’t be long before we are
right back where we are today. And I can assure you that
chronically slow growth will not help our long-term budget
situation.
Third, the problem with our deficit and debt is not new.
It has been building dramatically over the past eight
years, largely because big tax cuts combined with increased
spending on two wars and the increased costs of government
health care programs. This structural gap in our budget,
between the amount of money coming in and the amount going
out, will only get worse as Baby Boomers age, and will in
fact lead us down an unsustainable path. But let’s not
kid ourselves and suggest that we can do it by trimming a
few earmarks or cutting the budget for the National
Endowment for the Arts. Along with defense and interest on
the national debt, the biggest costs in our budget are
entitlement programs like Medicare, Medicaid, and Social
Security that get more and more expensive every year. So
if we want to get serious about fiscal discipline – and I
do – then we are going to not only have to trim waste out
of our discretionary budget, a process we have already
begun – but we will also have to get serious about
entitlement reform.
Nothing will be more important to this goal than passing
health care reform that brings down costs across the
system, including in Medicare and Medicaid. Make no
mistake: health care reform is entitlement reform. That’s
not just my opinion – that was the conclusion of a wide
range of participants at the Fiscal Responsibility Summit
we held at the White House in February, and that’s one of
the reasons why I firmly believe we need to get health care
reform done this year.
Once we tackle rising health care costs, we must also work
to put Social Security on firmer footing. It is time for
both parties to come together and find a way to keep the
promise of a sound retirement for future generations. And
we should restore a sense of fairness and balance to our
tax code by shutting down corporate loopholes and ensuring
that everyone pays what they owe.
All of these efforts will require tough choices and
compromises. But the difficulties can’t serve as an excuse
for inaction. Not anymore.
This brings up one final point I’d like to make today.
I’ve talked a lot about the fundamental weakness in our
economy that led us to this day of reckoning. But we also
arrived here because of a fundamental weakness in our
political system.
For too long, too many in Washington put off hard decisions
for some other time on some other day. There’s been a
tendency to score political points instead of rolling up
sleeves to solve real problems. There is also an
impatience that characterizes this town – an attention span
that has only grown shorter with the twenty-four hour news
cycle, and insists on instant gratification in the form of
immediate results or higher poll numbers. When a crisis
hits, there’s all too often a lurch from shock to trance,
with everyone responding to the tempest of the moment until
the furor has died away and the media coverage has moved
on, instead of confronting the major challenges that will
shape our future in a sustained and focused way.
This can’t be one of those times. The challenges are too
great. The stakes are too high. I know how difficult it
is for Members of Congress in both parties to grapple with
some of the big decisions we face right now. It’s more
than most congresses and most presidents have to deal with
in a lifetime.
But we have been called to govern in extraordinary times.
And that requires an extraordinary sense of responsibility
– to ourselves, to the men and women who sent us here, and
to the many generations whose lives will be affected for
good or for ill because of what we do here.
There is no doubt that times are still tough. By no means
are we out of the woods just yet. But from where we stand,
for the very first time, we are beginning to see glimmers
of hope. And beyond that, way off in the distance, we can
see a vision of an America’s future that is far different
than our troubled economic past. It’s an America teeming
with new industry and commerce; humming with new energy and
discoveries that light the world once more. A place where
anyone from anywhere with a good idea or the will to work
can live the dream they’ve heard so much about.
It is that house upon the rock. Proud, sturdy, and
unwavering in the face of the greatest storm. We will not
finish it in one year or even many, but if we use this
moment to lay that new foundation; if we come together and
begin the hard work of rebuilding; if we persist and
persevere against the disappointments and setbacks that
will surely lie ahead, then I have no doubt that this house
will stand and the dream of our founders will live on in
our time. Thank you, God Bless you, and may God Bless the
United States of America. |
