As President Barack Obama addressed a joint session of Congress on Tuesday, Feb. 24, he had two main jobs to accomplish on the economic front: First, he had to acknowledge the scope of the economic crisis facing the country while striking an optimistic tone. Then he needed to offer a broad-brush preview of the budget he plans to submit Thursday, even as he demonstrated a credible commitment to tackle a budget deficit groaning under the weight of hundreds of billions of dollars of economic-stimulus spending.
As expected, Obama offered little in the way of new economic or business policy, beyond a glimpse of the budget. He emphasized the urgency of health-care reform, which, together with energy policy and education reform, form the top tier of the Administration's initiatives. And he warned that restoring the financial system to health would be costlier than expected, suggesting he is likely to ask Congress for additional funds.
Throughout, he saw his main job as bucking up the American people without sounding too Pollyanna-ish. "We will rebuild, we will recover, and the United States of America will emerge stronger than ever," Obama said to the kind of rousing applause that typically peppers such joint-session and State of the Union speeches.
A Break With the Past
Blaming the economic crisis on gutted regulations, irresponsible home buyers, unscrupulous lenders, and "critical debates and difficult decisions…put off for some other time on some other day," he said that the "day of reckoning has arrived." He argued that it is now a time to "act boldly and wisely, to not only revive this economy, but to build a new foundation for lasting prosperity."
In many ways, the content of the speech was unusual compared to the Presidential addresses of his predecessor. Foreign policy, including trade, got short shrift, cropping up mostly toward the end of the speech, when he promised a speedy and responsible end to the wars in Iraq and Afghanistan, and to expand global markets while resisting protectionism.
And he spent several minutes early in the speech on the credit crisis, calling the restoration of credit Job One for the Administration and taking pains to lay out how reviving the banking system will help Americans generally: Fostering loans to a new homeowner creates jobs for homebuilders, who can then afford to buy cars or open their own businesses; conversely, he said, tight credit means fewer home and car sales, "so businesses are forced to make layoffs. Our economy suffers even more, and credit dries up further."
Failing to Act Could be Fatal
Acknowledging "how unpopular it is to be seen as helping banks right now, especially when everyone is suffering from their bad decisions," Obama argued that the Administration's plan to restore lending is "not about helping banks, it's about helping people." (Later, he lauded a Florida banker, Leonard Abess, for divvying up a $60 million bonus he received after selling his bank among 471 current and former employees.)
Not only will the plan "require significant resources," he said, but "probably more than we've already set aside." He argued, however, that failing to act would prove far worse.
The optimistic tone was in many ways a marked contrast from most of the five weeks of his Presidency, and during the transition before it, when Obama has pulled no punches about the grim economic news he and the country have had to absorb and often has given little more than a nod to the American public's resilience.
Further Emphasis on Potential Expected
Indeed, he's taken some knocks from political opponents for being too gloomy; Louisiana Governor Bobby Jindal, who gave the GOP response to Obama, scolded the President on this front, saying: "Our troubles are real, to be sure. But don't let anyone tell you that we cannot recover or that America's best days are behind her."
The optimism battles go beyond politicking, said Jeffrey Kling, a Brookings Institution senior fellow in economic studies. From here on out, expect to hear a lot more from Obama about the country's potential, and the promise of a strong recovery. "Restoring consumer confidence is probably the single biggest thing the President can do to get the economy moving," Kling said. "I expect to see the corner being turned here," at least rhetorically.
During the speech, Obama gave some hints about Thursday's budget proposal, calling for "comprehensive health-care reform" this year. "Let there be no doubt: health-care reform cannot wait, it must not wait, and it will not wait another year," he said.
Health-Care Reform Will Be Key
As some analysts predicted, Obama sought to tie health-care reform, which promises to be costly but could save billions over time, directly to reducing the deficit, arguing that "it's a step we must take if we hope to bring down our deficit in the years to come." Obama's budget chief, Peter Orszag, has argued for tackling health-care costs head-on, and soon, given that the government's Medicare and Medicaid programs will otherwise be a major component of future budget deficits.
But the realities of the deficit means "everyone in this chamber, Democrats and Republicans, will have to sacrifice some worthy priorities for which there are no dollars," Obama said. "And that includes me." He gave no specifics.
Obama argued that "the only way to fully restore America's economic strength is to make the long-term investments that will lead to new jobs, new industries" and a more competitive economy. To do so, the country must "confront at last the price of our dependence on oil and the high cost of health care," while improving education and tackling the deficit.
Easier Access to Education
On the last front, he said, Administration officials have already "identified $2 trillion in savings over the next decade."
Much of Obama's speech emphasized energy policy and the adoption of alternative energy like wind and solar power, as well as "clean coal" technology, and education reforms along with health reform. He urged greater support for charter schools and "new incentives for teacher performance," and called on every American to "commit to at least one year or more of higher education or career training," calling a high-school degree no longer sufficient for a modern workforce. To make it easier, he pledged support for tuition assistance for veterans and those "willing to volunteer in your neighborhood."
Obama promised to halt farm subsidies for big agriculture companies, "eliminate no-bid contracts that have wasted billions in Iraq," and adjust defense spending to avoid "paying for Cold War-era weapons systems we don't use." He called for further pushes on "waste, fraud, and abuse" in Medicare and signaled what may be a proposal to end, or at least pare back, tax breaks for foreign-earned income of U.S. corporations that isn't repatriated, vowing to "finally end the tax breaks for corporations that ship our jobs overseas." He pledged to roll back Bush-era tax cuts for the top 2% of Americans, but promised not to raise taxes on those earning less than $250,000 a year.
GOP Charges of Tax and Spend
Obama also presented the Administration's activity so far in the best possible light. He renewed his calls for bipartisan cooperation in the wake of garnering just three votes for the $787 billion stimulus bill he championed, for example. And he emphasized how his housing proposal, whose detractors say variously that it doesn't go far enough or that it bails out irresponsible homeowners, would at once help ordinary Americans save money on their mortgages and serve as a bluntly efficient way to restore economic stability.
In their official response, the Republicans pledged to work with Obama but quickly turned to familiar charges of tax-and-spend largesse against the Democrats. Jindal, a rising star in the GOP, said that rather than expanding the economy, Democratic legislation will "grow the government, increase our taxes down the line, and saddle future generations with debt."
"Who among us would ask our children for a loan, so we could spend money we do not have, on things we do not need? That is precisely what the Democrats in Congress just did. It's irresponsible," Jindal said. "And it's no way to strengthen our economy, create jobs, or build a prosperous future for our children."
Lukewarm Praise from Business
Business groups and analysts offered modest praise, noting generally that the speech hewed largely to expected lines. The Federation of American Hospitals praised his call for health reform, pledging to work with the Administration. Even officials from the banking industry, which came in for some of the harshest criticism in the speech, offered bland support for the Administration's efforts.
"Banks are prepared to do whatever it takes to work with the President to strengthen the financial system and restore the economy," said Scott Talbott, a lobbyist with the Financial Services Roundtable, which represents 100 large banks and other financial institutions.