Obama Pitches His Economic Plan
The President showed up in his role as Salesman-in-Chief on Apr. 14 in an hour-long speech on the economy at Georgetown University. Or, perhaps more appropriately for the setting—the late-19th century wood-paneled Gault lecture hall at the Jesuit-run university—he was also in full professor mode, bringing his talents as Explainer-in-Chief to a heavily detailed speech about how the U.S. economy got into such deep trouble, and how his complex and costly series of policy initiatives will help get it out of the current maelstrom.
No new news was broken, and no new programs were unveiled; the big news of the week came a day earlier, with the opening up of travel and telecommunications services to Cuba.
Instead, President Obama focused on a step-by-step explanation of how, in his view, the financial system collapsed, and why the tough road ahead will be needed to bring the economy fully out of its funk. He seemed acutely aware that despite months of explanation on his part, and those of his economic advisers, much of the public still doesn't understand what has gone wrong, why the banks need to be bailed out, or how his many initiatives—particularly those, like health-care reform and support for alternative energy, which tackle longer term goals—will help bring about recovery.
"I know that some have accused us of taking on too much at once. Others believe we haven't done enough," the President began. "And many Americans are simply wondering how all of our different programs and policies fit together in a single, overarching strategy that will move this economy from recession to recovery and ultimately to prosperity."
The speech was the latest in a series of efforts by Obama to ensure that he continues to maintain broad public support for the ambitious scope of his spending plans and economic policy priorities. But his target wasn't just the American people: With a tough budget fight looming and even bigger battles ahead over his pricey plans for health care and energy policy, his speech was also targeted squarely at bringing along his recalcitrant allies among moderate Democrats and Republicans on Capitol Hill.
"This was an indirect shot—a billiard shot, designed to reach members of Congress primarily by reaching the public," says Thomas Mann, a Presidential and congressional scholar at the Brookings Institute, a Washington think tank. "As he wrestles with the severe economic problems we face, [the broad public support he has] is a huge advantage for him and one he wants to maintain."
To do that, the President launched into what was, in essence a miniseminar on the causes of the current crisis—a talk one audience member termed "the most cogent explanation I've heard yet for what got us here today"—before going on to heartily defend the policy choices his Administration has made so far.
Signs of Progress
"I want to update you on the progress we've made, and be honest about the pitfalls that may lie ahead," he said, citing the signs of improvement that have begun to be seen on the housing front, with the bank bailout, in getting credit flowing again, and in the moves made to save the auto industry.
"Taken together, these actions are starting to generate signs of economic progress," Obama said. "Because of our recovery plan, schools and police departments have canceled planned layoffs… Our housing plan has helped lead to a spike in the number of homeowners who are taking advantage of historically low mortgage rates by refinancing, which is like putting a $2,000 tax cut in your in pocket. And small businesses are seeing a jump in loan activity for the first time in months."
But then the President dug into the real heart of the matter—and the real reason for the lengthy speech: Reminding people that despite the "green shoots" that have begun to sprout in the economy, there's still a long slog ahead. More job losses lie in the future, and more foreclosures are coming.
"This is all welcome and encouraging news," he added, " but it does not mean that hard times are over; 2009 will continue to be a difficult year for America's economy."
This is called managing expectations. After all the policies they've put in place, and all the many hundreds of billions spent, the President and his economic team want to be very careful that blame doesn't start to shift toward them if the turnaround isn't rapid. Although few economists expect it to be quick, the pinch on many lower and middle class families is likely to continue for many months ahead; the longer that goes on, the higher the risk that the Administration comes to be seen as responsible.
"Obama wants to stay on top of that debate," says Mann. "There's no expectation of a miraculous turnaround, but he's looking to create the right balance between patience and some optimism."
That the President himself would take on that task comes as no surprise: He's by far the Administration's most convincing salesman on the economy. In a recent Gallup survey, more than two-thirds of Americans—71%—said they had a great deal or a fair amount of confidence in President Obama to do or to recommend the right thing for the economy. That's a much greater level of confidence than they have in Federal Reserve Chairman Ben Bernanke, Treasury Secretary Timothy Geithner, or the Democratic or Republican leaders in Congress, wrote Gallup Editor-in-Chief Frank Newport in a recent Internet post. Both Bernanke and Geithner came in at slightly less than 50%.
But Obama also came to Georgetown to lay the groundwork for the tough policy fights ahead. Already, political support on Capitol Hill is waning for some of his signature policies, including imposing a cap-and-trade system to lower the harmful carbon emissions that cause global warming and the move to reform health care and broaden coverage to the more than 43 million uninsured. His high-spending budget, too, has run into opposition from Republicans and moderate Democrats alike, fearful that it will add hugely to the deficit even after the immediate crisis is over.
Uneasy About Spending
"The Democrats are on the defensive for spending too much money already," warns Andy Laperriere, a Washington policy analyst with institutional broker ISI Group. "Obama is losing some [congressional] Democrats on the fiscal issue, which reflects unease in the country about the level of spending—with the bailouts and the obligations we've already taken on."
Laperriere points out that the cost issue will be a critical factor in the debate over health care, since many Democrats have yet to signal their support for the tax hikes that would be needed to pay for an expansion without further increasing the deficit. As for Obama's plans to create an extensive cap-and-trade system that would raise the cost on harmful carbon emissions, Laperriere points out the opposition is simple: "It's a tax, designed to make energy use more expensive. It's not hard to see why that's politically controversial," particularly in a recession.
That's why the President is hitting the hustings: Much as he did on the campaign trail, he's trying to make the case that all [these measures] are needed to transform the U.S. economy onto a healthier, more sustainable footing once the crisis is passed.
"It is not sustainable to have an economy where in one year, 40% of our corporate profits came from a financial sector that was based too much on inflated home prices, maxed-out credit cards, overleveraged banks, and overvalued assets; or an economy where the incomes of the top 1% have skyrocketed while the typical working household has seen its income decline by nearly $2,000," he told the Georgetown audience.
A Clear Message
Instead, he argued, the solution lies with moving on to the core parts of the agenda he campaigned on well before the crisis hit—and that he insists remain necessary despite the trillions already spent to dig the economy out of its current hole: revamping education, creating a more skilled workforce, boosting investments in renewable energy to reduce dependence on foreign oil and produce new jobs, cutting the cost of health care, and trimming the federal budget to reduce the weight of the deficit on future generations.
"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," he said.
The message is clearly being sent, to Capitol Hill and beyond. Now, the question is, will it be received?