Obama Casts Crisis as Chance to Overhaul Banking & Health Care
By Hans Nichols and Julianna Goldman
Feb. 25 (Bloomberg) -- President Barack Obama framed the U.S. economic crisis as an opportunity to solve some of the nation’s most intractable issues and signaled that more taxpayer money would be needed to end the credit crunch.
In his first address to a joint session of Congress, Obama said last night the staggering economy has left “our confidence shaken” and promised “we will rebuild, we will recover, and the United States of America will emerge stronger than before.”
He tried to strike a balance between describing the symptoms of the U.S.’s financial woes and prescribing a cure. That prescription went well beyond the crisis that has forced banks such as Citigroup Inc. and Bank of America Corp. to seek billions of dollars in federal aid, to include the expansion of the government’s role in health care, energy and education.
His speech was “pointing out the light at the end of the tunnel,” said Mark Gertler, a New York University economics professor who has collaborated on research with Federal Reserve Board Chairman Ben S. Bernanke. “That hadn’t been done yet.”
The president, a Democrat, challenged Republicans in Congress to join him in a dramatic change of course. “The cost of action will be great,” he said. “I can assure you that the cost of inaction will be far greater.”
Republicans rejected the call to join forces. In the party’s official reply following the president’s speech, Louisiana Governor Bobby Jindal called Obama’s economic- stimulus plan “irresponsible” and said it will increase taxes and “saddle future generations with debt.”
Courting Skeptics
Obama, 47, anticipated such opposition, saying, “I understand your skepticism.” He promised to appoint Vice President Joe Biden to oversee how federal money is spent.
Obama, who has been in office little more than a month, is confronting a deepening economic crisis, with reports showing consumer confidence collapsed this month and home values plunged in December. Fed Chairman Bernanke told the Senate Banking Committee yesterday the U.S. is in a “severe” contraction and the recession may last into 2010 unless the financial system is stabilized.
While Obama pressed for immediate action on the crisis, he also called for sweeping initiatives on energy, health care and education, saying they are “absolutely critical to our economic future.”
‘Big Ideas’
“History reminds us that, at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas,” he said.
He called for a “market-based” cap on carbon emissions, which he said would lower U.S. production of greenhouse gases. He pledged to spend $15 billion a year to develop wind and solar power, biofuels, clean coal technology, and research into fuel-efficient vehicles.
The country also can’t afford to delay revamping the health-care system, he said.
“Health-care reform cannot wait, it must not wait, and it will not wait another year,” Obama said. The White House will hold a summit on the issue next week.
On education, the president set a goal for the U.S. to have the world’s highest proportion of college graduates by 2020. “In a global economy, where the most valuable skill you can sell is your knowledge, a good education is no longer a pathway to opportunity -- it is a prerequisite,” he said.
Government’s ‘Full Force’
Still, the economic crisis dominated his speech. He vowed to use “the full force of the federal government” to shore up the banking system and suggested that fixing the credit crisis will cost more than the $700 billion already committed.
The announcement may provide a boost to the nation’s lenders, whose share prices have fluctuated over speculation that they may need to be nationalized to ensure their survival.
“We now know that more money’s coming,” said Brian Gardner, a Washington policy analyst at Keefe Bruyette & Woods Inc. “There will be a political fight over it, but I think it was significant that he mentioned it.”
Obama’s advisers declined to say what marker they would use to indicate progress.
“I don’t think there’s any one indicator that’s going to say, ‘Aha, we’re out of the woods,’” senior adviser David Axelrod said in an interview. “I don’t think the American people expect miracles.”
Credit Markets Key
Clogged credit markets must be opened or “our recovery will be choked off before it even begins,” said Obama. The economic crisis stems from what he described as a short-sighted attitude that infected Main Street, Wall Street and Washington.
“We have lived through an era where, too often, short- term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election,” he said.
Polls show Obama holding onto his high approval ratings, although his numbers have declined since his inauguration. A Feb. 21-23 Gallup tracking poll showed Obama’s ratings dropping below 60 percent for the first time since Jan. 20.
In a nod to the populist uproar over Wall Street bonuses and lavish office decorating with taxpayer funds, Obama said, “I get it.
“I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage,” he said. “That’s what this is about. It’s not about helping banks -- it’s about helping people.”
Greater Accountability
Obama said his administration’s bank-rescue plan is “not about helping banks -- it’s about helping people” by opening up credit to individuals to let them buy homes and businesses to hire workers.
To make sure the financial crisis won’t be repeated, he called on Congress to act on legislation to reform the system of rules and regulations for markets.
He sought to temper his warnings about the severity of the crisis with optimism that it can be overcome. He insisted that the tools to revive growth are within reach.
“They exist in our laboratories and universities; in our fields and our factories; in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth,” he said. “What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.”
GM, Chrysler
Obama also touched on the struggles of General Motors Corp. and Chrysler LLC.
“We should not, and will not, protect them from their own bad practices,” he said. “But we are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it.”
GM, the largest U.S. auto company, is seeking as much as $16.6 billion in federal loans in addition to the $13.4 billion it has already received. Chrysler, the third-largest U.S. automaker, has asked for $5 billion more after getting $4 billion. The companies face a March 31 deadline to show the government they can revamp operations, return to profit and repay the money they owe the government.
To contact the reporters on this story: Hans Nichols in Washington at hnichols2@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net.
Last Updated: February 25, 2009 01:38 EST |
