There should remain no question as to how President Barack Obama intends to deal with the current financial crisis. Some of the greatest pieces of the solution lie in reducing health care costs, switching our energy dependence from foreign oil to clean resources that create jobs within the United States, investing in education and establishing policy that prevents systemic breakdown brought about by financial institutions.
In his opening remarks this evening, President Obama said the budget would cut the deficit in half by the end of his first term, and that we need to move from the borrow-and-spend mentality of previous years to one of save-and-invest if we’re going to bring down the deficit. He said there was a lot of rage and finger-pointing last week and, like so many others, he was angry about the large bonuses that went to those who brought us down and the culture that led us to this point. He said the days of out-sized rewards and speculation that put us at risk are over, but we can’t demonize every investor or entrepreneur who seeks to make a profit.
“We’ll recover. It will take time, patience and the understanding that when we work together and look beyond our short-term interests, that’s when we’ll prosper. We should look to the future with new determination and renewed confidence.”
The first question was from Jennifer Loven, AP who wanted to know why the American public should trust the government with “sweeping new authority” to regulate financial institutions.
Obama pointed out that this lack of authority is exactly what made AIG’s situation worse. He explained:
“It’s not a bank. If it was, then the FDIC could step in, as it does with lots of banks, in a structured way to renegotiate contracts, get rid of bad assets….[or] resell it in the private marketplace. We have a mechanism for FDIC-insured banks; we don’t have that with an institution like AIG. We need to restructure in an orderly way.”
Simply put, if we’d had such a mechanism in place, we could have handled the major systemic risk posed by institutions like AIG. Citing the example of IndyMac, Obama said we do [handle] it effectively when we have the tools.
Chuck Todd of MSNBC asked why Obama hasn’t asked the public to make specific sacrifices when some have cushioned the blow for those who have been irresponsible.
“First, it’s not true that we have not asked sacrifice from people getting taxpayer money; we’ve imposed conditions. The problem was with prearranged contracts. Any bank that receives capital has to have conditions on how it pays executives and dividends, how it reports lending practices. With respect to the American people, folks are sacrificing left and right….Lots of parents are cutting back on everything to make sure their kids go to college. Workers are cutting entire days of pay so their fellow co-workers are not laid off…people are making adjustments, large and small, across the board. What I’ve said is that we’ve got to make some tough budgetary choices. We can’t sacrifice long-term growth in investments that are critical to the future: health care, energy, education, that build the foundation for long-term economic growth as opposed to fleeting prosperity. When AIG selling derivatives counts as an increase in GDP, that’s not a model for sustainable economic growth. We have to reward ingenuity and innovation, but risks should be grounded in good products and services that can be marketed to the rest of the country.
The American people are making a host of sacrifices in their individual lives. [This is an] extraordinary crisis, but…the steps we’ve taken with respect to housing and small business, and increasing liquidity in the financial sector can stabilize the economy and get it moving. I’m looking to the American people to keep doing what they’ve always done, looking after their families, contributing to their community, [engaging in] volunteer activities, paying attention to debates going on in Washington…decisions will be tough and we need the support of the American people. That’s why I’m out front.”
Jake Tapper, ABC, said the Democrats were writing a budget that did not include middle-class tax cuts or cap-and-trade. He asked whether Obama would sign a budget without these two things.
Obama reiterated what he expects from the budget: serious health care reform efforts, clean and profitable energy policy, and upgraded K-12 education that drives down the budget. He never expected his budget to be xeroxed and he hasn’t seen it yet, but these principles will be in place. He said,
“We had a tax cut in place already and a specific way to pay for it. If Congress has a better way to pay for it, we’ll listen. [Regarding] cap-and-trade, we have to move to a new energy area…move away from polluting energy sources [to clean ones]. Cap-and-trade is the best way to achieve some of these gains…it has to take regional differences into account and protect consumers; technical issues have to be sorted out, but we can’t wait. Let’s get started now.”
Chip Reid, CBS, stated that Republicans are saying that this is the most irresponsible budget in history and that it increases the deficit by $10 trillion. He asked whether this wasn’t the debt that Obama previously stated he didn’t want to pass on to the next generation.
Obama said that, having inherited a $1.3 trillion deficit per year from them, he suspected those critics had a short memory. He said:
“…even under the most conservative estimates, we drive down the deficit over the first five years of the budget. It’s cut in half. That’s not in dispute. What is disputed is what happens in the outyears due to a difference in assumptions about growth.
Although we don’t know what will happen 6-10 years from now, Obama’s assumptions of a 2.6% growth rate is consistent with all the blue chip forecasters. He said,
“if we don’t drive down health care costs, change our energy policy, and invest in science, technology and infrastructure – we won’t grow. Let’s make investments that put us on a pathway to growth, as opposed to not making investments and still having trillion dollar deficits. These critics haven’t put out an alternative budget because they know the biggeset driver of long-term deficits are the huge health care costs we have to tackle. If we don’t deal with the structural problems in the deficit [that were there before Obama got there], we’ll continue to see problems in the outyears.”
Obama said he was looking at wasteful spending in Medicare, procurement practices within the pentagon and social service programs that don’t work. It will be impossible to balance the budget if we don’t take on health care costs, are not boosting growth rates and not focusing on investment.
Reid said the deficit goes up in the outyears.
Obama said there were many adjustments that would need to be made that were not reflected in this budget. Savings from entitlement programs such as Medicare and Medicaid would not be seen until later as these are long-term problems. He summed up:
“A budget is a snapshot of what we can get done right now. We’ll have a series of new budgets over the next several years. We’ll have to make adjustments. Keep in mind, as a percentage of GDP, we are reducing non-defense discretionary spending to the lowest level since the 1960’s – lower than under Reagan, Clinton, Bush and Bush. If we’re growing, creating new businesses, expanding economy, eliminating programs [that don’t work], over time the gap can close. I’m not going to lie; it’s tough. The critics criticize, but don’t offer an alternative budget. Even without investments we’ll have the deficits, but nowhere to go.”
Kevin Barron, Stars and Stripes, asked “Where will you find savings in the VA budget?”
Obama said the budget put forward offers the largest increase in vet funding in 30 years. The sacrifices made by those in uniform have earned them the benefits they’ve received. In the recent past, the VA has been largely under-resourced and the American people want to see these benefits funded. Obama said he was working with Gates to figure out how to reform the procurement system in such a way to save taxpayer money while still keeping America safe.There is a uniform acknowledgment that the procurement system does not work right now, and even republicans like Carl Levin and John McCain agree. The Obama Administration has already identified $40 billion savings made by procurement reform, and they will continue to find savings that keep resources where they’re needed without simply fattening defense contractors. Obama said we have to be honest as to what these costs are’ that’s why it was so important to acknowledge the true costs of the Iraq and Afghanistan wars.
Ed Henry, CNN Sr. White House Correspondent, went on a bit of an attack, indirectly accusing Obama of not acting as fast or as effectively as Mayor Cuomo with regard to the AIG bonuses. He said, “You waited to go public with your outrage.” He also implied that even though Obama inherited a fiscal mess, his daughters might be inheriting an even bigger one. He suggested that Obama was, perhaps, not worried about this.
Obama said that of course he was worried, and that’s why his administration is working so hard. He explained that the reason it’s such a difficult problem is that his administration had inherited a structural deficit, and how we have to bend the curve on deficit projections. Standing pat is the alternative, meaning not taking on health care or energy reform, waiting until gas hits $4/gallon again, not improving our schools, allowing China and India to lap our young people in terms of performance, settling for lower growth rates. This would result in a further contraction of our economy and is not a better option. Obama said he’s not satisfied with all the work that needs to be done and, so, is looking at entitlements.
With regard to Henry’s question about AIG, Obama explained his refreshing approach: “It took us a couple of days because I like to know what I’m talking about before I speak.”
Major Garrett, FOX News, suggested that China and Europe are not confident in the US dollar and asked if Obama was comfortable with their discomfort. He also claimed that Europeans say Obama is asking them to spend too much. He also asked if Obama saw the need for a global currency, possibly in an attempt to calm the fears of the radical fringe.
Obama said he had not asked European countries to do that – only to take steps to lift the economy. He said we can’t expect some countries to lift up the global economy without all countries who are able at least taking some steps in that direction. Earlier today, Obama met with the Australian Prime Minister who said that countries who can must take steps to fill the hole. Obama said the goal of the G20 summit is to say to all countries,
“Let’s do what’s necessary to create jobs, avoid steps that result in protectionism that further contracts global trade, focus on moving regulatory process forward so we don’t see systemic breakdowns (dealing with banks and other unregulated financial flows). We’ll have to coordinate with other countries to accomplish that. [Regarding confidence] …the US dollar is strong right now because investors still consider the US the strongest economy with the most stable political system in the world, that we’re going through a rough patch, but there is a great deal of confidence that prospects are still strong.”
Regarding America’s global image, the response people have had to the Obama administration reflects a sense of restored confidence in the ability of the US to assert global leadership. Obama said “there is no need for a global currency.”
Mike Allen, Politico, asked if Obama regretted cutting the tax deduction for charitable donations. Obama explained that the change only affected those in the highest income tax bracket, that their donations would be written off at 39% instead of 28%. Under the Bush Administration, the wealthiest 5% of Americans typically saw huge gains while average workers watched their incomes stagnate. This small change is an equalizer. He added that the point of charitable donations was charity, and didn’t believe that this small change would affect the amount of donations charities would be receiving. The larger impact on charitable giving comes from a contracted economy. And so, we need to get banks lending, businesses opening their doors and people back to work.
In addition to questions about the economy, Obama was asked about problems at the US/Mexican border, homeless families in America, stem cell research, race issues with regard to Obama’s presidency and Israeli/Palestinian peace.
The administration is sending money and personnel to deal with the border issues, and will continue to monitor the situation. If the steps they’ve taken don’t get the job done, they’ll do more. Obama said Calderon was taking on the drug cartel problem courageously and we’ve got to take steps to make sure illegal drugs and cash don’t go back to the cartels.
Obama said he was heartbroken that any American child is homeless, and the best thing he could do would be to get people back to work. That’s why the recovery package creates or preserves 3.5 million jobs and extends unemployment benefits. He is working closely with states to monitor and help people who fall through the cracks. He pointed out that the homeless rate is much higher among veterans than non-veterans, and stated he was taking specific steps to address this, including the increase of VA funding.
Obama told Ann Compton, ABC Radio, that although at the inauguration there was a pride on the part of the country that we had moved past a searing legacy of racial discrimination, the last 64 days had been dominated by him trying to figure out how we’re going to fix the economy.
The President said that when he lifted the ban on federally funded stem cell research, he wrestled with the decision as he wrestles with such issues daily and said a scientific consensus was not enough.
“I believe it’s very important for us to have strong moral and ethical guidelines regarding stem cell research or anything that touches on issues of possible cloning or human life sciences…I wrestle with it on stem cell and abortion. The guidelines we provided [regarding stem cell research] meet that ethical test. For embryos that are about to be discarded, for us to be able to use them to find cures for Parkinson’s disease, Alzheimer’s or other debilitating diseases [like] juvenile diabetes, it’s the right thing to do…I have no investment in causing controversy, I’m happy to avoid it if that’s where the science leads us. I don’t want to predetermine this based on a rigid ideological approach. That’s reflected in the order I signed…I don’t take this lightly. I respect other opinions. This was the right and ethical thing to do.”
President Obama said he didn’t know what the Israeli government would look like or what the Palestinian leadership would be comprised of, but that the status quo is unsustainable and that it was critical to advance the two-state solution. Assigning George Mitchell to work as a special envoy to the region was a signal that his administration is serious about moving parties to acknowledge that reality. He said persistence was necessary and he intended to remain persistent with regard to a two-state solution and more.
“The whole philosophy of persistence is one I’ll be emphasizing again and again in the months and years to come, as long as I’m in this office. I’m a big believer in persistence. When it comes to domestic affairs, I think that if we keep on working at it, acknowledge mistakes and that we don’t have the right answer all the time and that we’re inheriting knotty problems, we can pass health care, we can find better solutions to our energy problems, we can teach our children more effectively, we can deal with a very real budget crisis…that is not fully dealt with at this point but makes progress. When it comes to the banking system – a few days ago people were certain that Secretary Geithner couldn’t deliver a plan. Today the headlines all look like, well… there’s a plan. And I’m sure there will be more criticism and we’ll have to make more adjustments, but we’re moving in the right direction.
Regarding Iran…we did a video, sending a message to the Iranian people and the leadership of the Islamic Republic of Iran, and some people said ‘we did not say we are immediately eliminating nuclear weapons and stop funding terrorism.’ Well, we didn’t expect that…We expect steady progress on this front. We haven’t immediately eliminated the influence of lobbyists in Washington. We haven’t immediately eliminated wasteful pork projects and we’re not immediately going to get peace in the Middle East. We’ve been in office now a little over 60 days. What I am confident about is that we’re moving in the right direction….and we’re going to stay with it as long as I’m in this office. And I think that, you look back four years from now, I think, hopefully, people will judge that body of work and say we’re a big ocean liner…it’s not a speedboat. It doesn’t turn around immediately, but we’re in a better, better place – because of the decisions that we made.”