Obama Says Debt Fight Boosted Uncertainty About Economy, Hurt Job Efforts
President Barack Obama said the standoff in Washington over the debt ceiling damaged the economy by creating more uncertainty about the nation’s direction and stalling work on measures to boost jobs and growth.
“We have a political culture that doesn’t seem willing to make the tough choices to move America forward,” Obama said at a town-hall event in Cannon Falls, Minnesota, the opening leg of a three-day trip in the Midwest.
The president is seeking to reassure anxious voters that he has a plan to prop up the ailing economy when his ability to deliver on the necessary prescriptions is anything but certain.
At the Minnesota stop and a second one in Decorah, Iowa, he mostly reiterated a familiar set of prescriptions, including ratification of free-trade deals and overhauling patent law. Obama also has proposed renewal of a 2-percentage-point cut in the payroll tax for workers and extended unemployment benefits that are set to expire Dec. 31 and establishment of an infrastructure bank to fund public works spending.
“There is no shortage of ideas to put people to work right now,” Obama said in Cannon Falls. “What is needed is action on the part of Congress.”
While Obama insisted he wasn’t campaigning, both events were reminiscent of his 2008 run for office, including the same music soundtrack. The questions from the crowds were friendly.
Obama won all three states he’s visiting in the 2008 election and he’s seeking to hold them in 2012. The unemployment rate in Minnesota stands at 6.7 percent and Iowa’s is 6 percent, both below the national average of 9.1 percent. The jobless rate in his home state of Illinois is 9.2 percent.
In response to the president’s trip, the Republican National Committee released an ad, “Obama’s Debt-End Bus Tour,” that lists the jobs lost in Minnesota, Iowa and Illinois since he took office.
Reince Priebus, chairman of the RNC, said on CNN that the bus tour is “a campaign event paid for by the taxpayers.”
Before Obama arrived in Decorah, Texas Governor Rick Perry, who announced he’s running for the Republican presidential nomination, addressed the Democratic president in his campaign speech.
“He says he’s on a listening tour, so I’m going to talk to him,” Perry said in Des Moines. “Mr. President, you need to free up the employers of this country to create jobs, get rid of the regulations that are stifling jobs in America.”
Taxes and Spending
Obama repeated his call for a mix of tax increases on the wealthy along with cuts in government spending to cut the nation’s long-term deficit. He said House Speaker John Boehner walked away from negotiations to curb the nation’s long-term debt because the Ohio Republican and other members of his party won’t “ask anything of millionaires and billionaires and corporations to close our deficit.”
“My friends and I have been coddled long enough by a billionaire-friendly Congress,” the chairman and chief executive officer of Berkshire Hathaway Inc. wrote. “It’s time for our government to get serious about shared sacrifice.”
Obama is hitting the road at one of the most challenging junctures of his presidency. A worsening economic outlook, Standard & Poor’s first-ever downgrade of the U.S. credit rating, risks of a spillover effect from Europe’s debt crisis and volatility in global markets are drawing comparisons to the beginning of the 2008 financial crisis and confronting Obama with a confluence of forces over which he has little control.
With some Democrats pushing for bolder action to spur growth and Republicans showing no appetite for additional stimulus that would add to the deficit, the president’s mission for now is twofold: encourage consumers to keep spending and boost business confidence so companies will invest in new jobs. Success may mean the difference between a slow recovery and a double-dip recession.
“The economy could go either way, and at these kinds of turning points, confidence is key,” said Gus Faucher, director of macroeconomics at Moody’s Analytics. “It’s the administration’s hope that if the president is out there, talking up the economy, it will prevent a downturn.”
Focus on Congress
As he did last week in a speech in Michigan, Obama sought to increase pressure on Congress.
“I’m not here just to enjoy the nice weather, I’m here to enlist you in the fight,” Obama said in Minnesota. ‘We are fighting for the future of the country.”
The unsettled economy was reflected in last week’s record swings for the Standard & Poor’s 500 Index and a mixed assortment of economic news. The S&P 500, which fell or rose at least 4.4 percent in the previous four sessions, climbed 0.5 percent to 1,178.8 on Aug. 12 in New York. Today the benchmark index advanced 2.2 percent to 1,204.49 at 4 p.m. in New York.
Obama said investors remain confident in the country, citing a three-week rally in government bonds that pushed 10-and two-year note yields to record lows.
“The market said, ‘America is one of our best bets,” Obama said. “That’s why you have to recognize this is not a financial crisis -- though it could turn into one if we don’t do anything about it -- this is a political crisis.”
The state of the economy and the size of the nation’s long- term debt will be central issues in the 2012 presidential campaign, and voters are growing increasingly frustrated with the government. Obama’s approval rating hit the lowest point of his presidency, 39 percent, in Gallup Inc.’s tracking poll for Aug. 11-13. Fifty-four percent of respondents disapproved. His approval rating rose to 41 percent in Gallup’s Aug. 12-14 survey released today.
“The country is in an unbelievably angry mood,” said Democratic pollster Stanley Greenberg. “You are dealing with a turn away from Washington, from politicians in general.”
An Aug. 9 Washington Post survey found that 71 percent of Americans said the federal government is mostly focused on the wrong things and 78 percent said they were dissatisfied with the way the country’s political system is working. The poll has a margin of error of plus or minus 4.5 percentage points.
Obama sought to tap into that sentiment.
“There is nothing wrong with America that can’t be fixed,” he told his audience. “What’s broken is our politics.”
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