Obama Says Budget Debate a Battle for Middle Class Future
July 25 (Bloomberg) --President Barack Obama is shifting his attention to the budget battles looming later this year by casting his differences with congressional Republicans as a struggle over the future of middle-income Americans.
“Our focus has to be on the basic economic issues that matter most to you, the people we represent,” Obama said at Knox College in Galesburg, Illinois, the first of two addresses he delivered yesterday. “And as Washington prepares to enter another budget debate, the stakes for our middle class and everybody who is fighting to get into the middle class could not be higher.”
When members of Congress return from their August recess, they and the president will confront a host of decisions affecting the economy, including determining federal spending levels and raising the government’s $16.7 trillion debt limit.
Republican lawmakers are demanding spending cuts in exchange for raising the debt limit while Obama argues for spending increases for infrastructure improvements, expanded educational opportunities and more support for research -- a recurring drama in fiscal negotiations since 2011.
Obama will follow up his renewed effort with a speech today at a port facility in Jacksonville, Florida, making the case for improving the nation’s roads, bridges, airports and harbors. In the coming weeks he will break out other pieces of his economic agenda, such as policies to improve education and make college more affordable.
Following months when the focus of Washington has been on the president’s second-term job appointees, his push for a new immigration law, attempts to block his signature health-care law and Republican-led investigations into his administration, Obama is seeking to use the power of his office to return attention to the economy.
“With an endless parade of distractions, political posturing and phony scandals, Washington has taken its eye off the ball,” Obama said in Galesburg. “I am here to say this needs to stop.”
Even as the economy continues to expand and add jobs four years into the nation’s recovery from its worst recession since the Great Depression, Americans at the middle of economic ladder haven’t regained lost prosperity.
The economy grew at a 1.8 percent rate during the first three months of the year, more slowly than its 2.5 percent average pace during the last two decades. The unemployment rate, at 7.6 percent in June, remains above its 6 percent average over the past 20 years.
While the benchmark Standard & Poor’s 500 stock index is up more than 18 percent this year and has nearly doubled since Obama took office in 2009, the median household income of $51,500 in May remains 5 percent lower than in June 2009, the official end of the recession, according to estimates by Sentier Research.
“Unfortunately, there is little real progress that has been made for the middle class,” Lance Roberts, chief strategist who helps manage $600 million at StreetTalk Advisors in Houston, Texas, said in an e-mail.
Obama may be setting an argument that blame for inaction “can be laid squarely at the feet of the Republicans prior to the 2014 election cycle,” Roberts said.
“We’re not going to raise the debt ceiling without real cuts in spending,” Boehner told reporters July 23 in Washington.
Obama has said he will refuse to accept anything short of a clean debt-limit increase.
In Galesburg and a later address in Warrensburg, Missouri, the president accused his critics of being short-sighted. He said the U.S. must maintain funding for education, training, infrastructure and research to maintain a competitive edge in the global economy.
“If we don’t make investments in education and manufacturing and science and research and transportation and information networks, we will be waving the white flag while other countries forge ahead,” he said at the University of Central Missouri.
Obama spent a portion of his Galesburg speech on the brewing -- and past -- debt ceiling debate.
“We’ve seen a sizable group of Republican lawmakers suggest they wouldn’t vote to pay the very bills that Congress rang up, a fiasco that harmed a fragile recovery in 2011, and one we can’t afford to repeat,” he said.
In the debt ceiling debate two years ago, lawmakers and the White House battled for months before Obama signed an increase into law on Aug. 2, 2011, the day the Treasury Department warned that U.S. borrowing authority would expire.
While Standard & Poor’s stripped the U.S. of its AAA top credit rating as a result, investors indicated they weren’t concerned about the government’s debt or its ability to pay its bills. The yield on 10-year Treasury notes on Aug. 5, 2011, when S&P announced the downgrade, was 2.56 percent. The yield fell as low as 1.39 percent on July 24, 2012.
Fed Chairman Ben S. Bernanke told a congressional panel last week that another prolonged debate over the debt ceiling could hamper the recovery. He also said continued tight fiscal policy threatens to restrain growth.
Republicans yesterday said Obama is offering more of the same prescriptions he has offered since he was first elected. Senator John Cornyn, a Texas Republican, released a statement before Obama arrived in Illinois saying the president got most of his economic package passed in his first term.
“We now know what the results have been,” Cornyn said. “Add it all up, and we’ve been experiencing the weakest economic recovery in the longest period of high unemployment since the Great Depression in the 1930’s.”
Boehner, in a House speech, said Obama’s address would accomplish nothing. “It’s a hollow shell,” he said. “It’s an Easter egg with no candy in it.”
He called on Obama to speed approval of TransCanada Corp. (TRP)’s Keystone XL pipeline, delay implementation of the health-care law that Congress passed in 2010 and “stop threatening to shut down the government unless we raise taxes.”