With signs that the worst of the recession may have passed, President Obama is trying to keep the nation focused on a still-troubled economy and regain momentum in Congress for his plan to revamp healthcare, energy, education and financial regulation — thorny issues that have long defied solution.
"By no means are we out of the woods just yet," Obama said in what amounted to an economic State of the Union address Tuesday.
The worst economic crisis since the Great Depression grew out of "a perfect storm of irresponsibility and poor decision-making," he said, and "we cannot rebuild this economy on the same pile of sand."
Already facing push-back in Congress on his overall economic strategy, Obama was effectively laying down a marker: He will fight for his ambitious agenda and argue that his opponents are putting long-term recovery at risk.
"Washington is, shall we say, a very perishable town," House Speaker Nancy Pelosi (D-San Francisco) told reporters recently. "If you have an opportunity, you should seize it. Otherwise, it might not be there. And the forces of the status quo are mighty, and they have deep pockets and they can wait you out."
House Minority Leader John A. Boehner (R-Ohio) is one who would rather see the president’s efforts stymied. He said Tuesday that the huge price tag for some of Obama’s initiatives would stifle economic growth, not foster it.
"Our economy will improve — but it will be because of the ingenuity and hard work of American workers and small businesses, not because of the Washington Democrats’ misguided policies that rely on recklessly spending taxpayer dollars," Boehner said.
The administration’s top economic officials have been sounding notes of optimism recently, buoyed by a surge in financial markets and some improving economic indicators. There have been encouraging data on home sales, home building and business inventories, though the signals have been mixed.
In his speech, Obama acknowledged the encouraging signs, declaring that the "extraordinary action" of his administration in its first three months had contributed to those glimmers of hope. Among the actions was the $787-billion economic stimulus legislation, which he said had helped spur consumer demand and restore some flow of credit that’s vital to businesses.
Ethan Harris, co-head of economic research at Barclays Capital, said the stimulus spending would slow the economy’s plummet, but he still expected a 2% to 3% decline in economic growth in the second quarter.
Unlike most recessions, which end with a strong surge in demand and growth, this one is more likely to give way to a slow recovery as the economy continues to suffer from a shellshocked financial sector, Harris said. That’s why he believes it is crucial that government spending from the stimulus program extends well into next year.
"It’s not just a matter of stopping the recession," he said. "We have to keep pushing in the months after the recovery begins to restore normal growth."
Tuesday’s report of a sharp drop in March retail sales underlined Obama’s perilous position.
In a speech Tuesday in Atlanta, Federal Reserve Chairman Ben S. Bernanke said there had been recent "tentative signs that the sharp decline in economic activity may be slowing." But he added, "We will not have a sustainable recovery without a stabilization of our financial system and credit markets."
Obama tried to drive home his point about economic reforms by using a parable from Jesus’ Sermon on the Mount about a man who builds a house on sand, only to see it destroyed by a storm. Another man’s house survives because it is built on a rock.
"We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock," Obama said. "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."
Obama’s foundation has five pillars: new rules for banks and financial services companies; more educational spending; new investments in renewable energy and technology; healthcare reforms to lower costs; and budgetary savings to reduce the national debt.
"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," Obama said.
"This can’t be one of those times. The challenges are too great; the stakes are too high." (LA Times)