Obama: A Continued Economic Decline Is Not Acceptable

Barack Obama, addressing the press for the fifth straight day, offered perhaps his gloomiest assessment yet on the current economic situation. Relaying how the talks with his economic teams have revealed a landscape far more challenging than previously imagined, he insisted that "a significant amount" of government spending was needed "on the front end."

"What is striking in the conversations that we have had with economists from the left and the right over the past several months is how the economic forecasts have deteriorated, and the conclusion has been with credit freezing up, with businesses laying off workers, with a continued weakness in the housing market, and escalating foreclosures, that unless you have a bold approach, you could see the economy continuing to decline at a pretty rapid clip. That is not acceptable to me," he told reporters. "I don't think it is acceptable to the American people."

More bad economic news is indeed anticipated. The housing market is expected to get hit with another round of massive foreclosures as rates on subprime and other loans get bumped up. Moreover, state budgets are precarious and governors could also end up pleading for bailouts from the federal government.

Reports from inside the transition and on Capitol Hill suggest that the stimulus package Obama will sign after taking office could grow to $1 trillion. It is a sum of money that humbles even the president-elect.

"First of all, I'm concerned about the numbers being talked about," he said. "We are not intending to spend money lightly. You know, the tax burden on Americans are already high. We are inheriting a deficit that is probably above $1 trillion. And so, look -- I'm a taxpayer like everybody else, and I don't want to see money wasted."

Obama went on to note that, in this environment, tough budgetary choices will have to be made. And that the idea of narrowing the deficit was unrealistic. That, however, wasn't an excuse for fiscal prudence. Or, for that matter, to not have one's eye on the long-term effect of near-term spending.

"I am confident that we are going to put people back to work," said Obama. "I'm confident that businesses are going to start growing again. It is going to take some time, but we can get this done. Once we have an economic recovery and the economy is growing again, then we are going to be confronted with this enormous deficit... and so, part in parcel of the overall economic plan is going to be a mechanism to get our mid-term and long-term budgets under control. I want to be very clear, we are going to make some difficult choices on the budget, and I'm going to make sure by the way that some of the difficult choices are under my watch and not just somebody else's watch."

Comments

[DenisPombriant]

We need to get in front of this issue. The spending we are talking about--$1 trillion or more--is so large that Republicans will soon revert to worrying about deficits and obstructing the recovery. Repeat after me: The national debt, to which deficits contribute, should be treated as a revolving credit account. Sometimes you take money out but other times you put it back. We haven't put anything back in 8 years and while this isn't the time to start, if we all agree on the future need to put back, then the near term borrowing will be acceptable in context. If we just concentrate on deficits, it will be a hard slog.

[bygollymissmolly]

And who took it from a record surplus to a record deficit in 8 short years?

[vjoseph]

Well said. I vote that we put pressure especially on the Rethugs in Congress

[MajorKong]

Boy, it's a good thing we still have that surplus that Bush inherited. Oh wait......­.

[levibatgirl]

Unbelievable isn't it?

[vjoseph]

Can we also blame that on Clinton?

[ThePeacemakers]

They need to pass an emergency measure to stop BANKS from raising interest rates any more ridiculously than they are. Especially when these SOBs are getting money now for nothing...
Makes me want to K - - - ! The only way to get rid of these greedy SOBs???
PERIOD>

[vjoseph]

Hmmm.. newsflash, interest rates are at an all time low of .25% Do your homework, mkay

[GeoLee]

And don't you love the news credit card rules ...that won't go into effect until 2010.

[ema]

So then why did he hire all the clowns that got us into this c r a p? That's what I want to know.

[Hawka]

I'm pretty sure G.W.B and Cheny weren't given cabinet posts last I recall...

[ema]

Sure GWB and Cheney allowed this crisis to happen and failed to act when it was obvious that we were headed for disaster. But the real engineering of it happened with other players -- bankers, regulators, chairs of various FEDS, economic advisors and many of them are in the Obama administration. If you want to blind yourself to that fact, fine. But I am keeping my eyes wide open.

[SoCalAmerican]

Can you be more specific in identifying the 'clowns' he hired and how in the past 8 years during the Bust Administration they specifically contributed to the current economic state of our country?

Speaking in absolute and extreme generalities makes you sound like someone from the far far right.

[ema]

Geithner was the chair of the New York Fed and should have been responsible for policing the industry. He has been working with Paulson and Bernanke from the beginning of the crisis and was involved in the decision to let Lehman fail which as you can remember was what sent shock waves through the financial sector. Since then he has been working on the bailout and the allocation of the TARP funds with Paulson and Kashkari. The TARP program has either been a colossal failure or a major heist. Where is the money?

Summers was the Secy of the Treasury under Bill Clinton and responsible for a lot of the deregualtion which caused this mess in the first place.

In addition, his regulatory team (Schapiro and Gensler) are real insiders who are known for being pretty laissez faire and subscribing to the philosophy of letting the market regulate itself.

Sorry for the little emotional outburst post which made me sound like a righty. I just finished reading this article:

http://www.nytimes.com/2008/12/19/business/19gensler.html

[hamchunk]

That's what I am talking about: Lower those expectations. Lower them so much that, in 2011, if half the population has not committed mass lemming-like suicide off the Grand Canyon, you can declare it a great sucess.

[theone718]

Will you be doing that after Obama helps create 5 million jobs?

[vedder110]

You really have a deluded idea of the power of a President.

[Strywever]

Look around you. See those people losing their jobs? See those houses with For Sale or foreclosure signs? See the lines at the food banks and the Employment (in)Security offices? Reality sucks. But it has to be faced.

[Icantbelieveher]

You can't lower expectations any lower than they are after 8 years of Bush/Cheney!

[hamchunk]

Yeah, ya got me there.

[PATina]

Man... I bet you if this story mentioned Rick Warren... there would be quadruple the responses by now.

[theone718]

You know, they say the media doesn't have their priorities straight. Sometimes you realize they aren't the only ones.

[vedder110]

That is because people inherently prefer tabloid style news than public policy discussions. This is the real reason Fox News is so successful.

[vjoseph]

That's sad. I have also realized that there were not as many replied to Boosh articles about his midnight regulations, which to me is far more important. He just basically said a big F U to all women and the environment in one stroke of a pen!!! We just stand and continue to take it.

[polaris12]

But the bank and Wall Street crooks still get their bonuses.

[nippersdad]

I think that one of the "hard choices" was to pay off the oligarchs so that they would not pick up all of their marbles and move to Bermuda thereby collapsing what is left of the economy and leaving us in Mad Max territory.

[PATina]

Well President O... your turn at bat is nearly here. While I don't have much faith in the de-regulators/trade hawks you picked for your "financial" cabinet... the economy is so dire right now... tI don't think they have much choice BUT to push progressive measures to turn things around. Hopefully you'll repeal the Bush tax cuts as soon as you get into office.

[vjoseph]

There are great articles about those members of the economic team that might actually change your mind. In particular, you might want to research more on Austen Golsbee and Jason Furham who have been with Obama from the get go. Also, research Peter Orzag who is a proponent of health care reform. You are only stuck on Larry Summers and Tim Geithner, who btw, is a proponent of regulation, not the other way around. He works at the Fed which is not a governmental bank

www.prospect.org
delong.typepad.com
http://cboblog.cbo.gov/
http://www.brookings.edu/experts/furmanj.aspx

[lb458]

Why can't the government keep the interest rates on the loans from resetting in the first place? It that is going to be an issue and drag our economy down further then why not put a moratorium on interest rate increases due to the dire economic conditions that we now face? It seems to me that this would be a way to stop the next wave of foreclosures before they begin and keep us from having to foot the bill for a bigger mess.

[vedder110]

The interest rates on the loans is how the banks make their money to account for the massive amount of debt leverage they have. If you put a ceiling on the interest rates than the banks can no longer loan as much, and you eventually end up with the same problem of having to bail the banks out. There is no easy solution to an asset bubble, especially of this magnitude. This exposes yet another inherent problem with fractional reserve banking: once the banks stop getting their loan payments, and people start withdrawing more than they deposit, the essential illiquidity of bank is exposed. They banks promised more money than they actually have in reserves, just like Bernie Madoff. Except the Ponzi-lite scheme of fractional reserve banking is supported by the law and backstop government programs like the Federal Reserve and FDIC. It only becomes a problem when everyone starts wanting much more of their money back at such a large scale.

[Cogitoe]

Here's a policy question for the HuffPo audience. How does Obama best spend the trillion dollar stimulus package? More particularly, how does he spend the portion allocated for infrastructure projects? Does his Administration stand by prevailing union wage standards or does it seek too maximize the number of unemployed construction workers it can hire and increase the number of public works projects it can complete? FDR went for the latter.

[PATina]

I would say maximize the number of unemployed workers (not just constructi­on... I'm sure they will need other workers to run the projects). As more people have more money to spend... the faster we can turn things around.

[Tulka2]

Number one, set up a national pro-active, wellness based, health care program. This would create millions of jobs most especially on the ground, in neighborhoods, for WOMEN and men... just where the jobs are needed. This is the best way to get help to the poorest and to children. This would be the start of keeping jobs in the U.S. The main reason jobs have been going overseas is corporations are avoiding health care costs here.

I want to see neighborhood health care centers in every neighborhood, along with child and elder care.

Second idea....? National transportation system... this is mostly jobs for men, but it would be made possible by national health care.

Big disasters requite big solutions.

[salsmom]

maximize the number of unemployed, so that you maximize how much is then put back into the economy. but we all need to remember that being paid minimum wage or darn near that amount doesn't cut it with the cost of everything else that families and individuals face these days.

[vedder110]

Stimulus packages direct capital from one place to another, so it adds nothing directly to the economy. It can be used to lower unemployment like FDR, and that has a tremendous social benefit of keeping people productive; however, it is basically just a huge workfare program, and it isn't going to increase our real GDP or anything like that. If you pay too high wages on a huge temporary workfare program, you will direct labor from private enterprise that could be used to provide more economic benefits and further employment in the long term. Lowering unemployment is a useful social goal, but at the same time you don't want to negatively impact the concurrent economic recovery; the poor investments from the last decade or so are need to be liquidated and new investments will need to be made that are more productive in the long-term.

So you want to spend money on short-term projects that have real long-term benefits (no big ditches or pyramids) at decent living wages that private enterprise can more easily compete with as new businesses are started. This is probably best satisfied by repair and improvement to existing infrastructure, not creation of great big new projects that have little short-term benefit and that will employ more people at the time when new private businesses will find it hard to compete with big government projects.

[vjoseph]

Dude, you sound like Obama. He mentioned something similar at the press conference, which Sam didn't report

[vedder110]

I think another great place to spend a depression recovery package is on worker retraining and adult education programs. The recovery of a free-market economy allows for the failure of obsolete industries in order to free up the capital and labor for new and more productive industries. This creates more employment and higher average standard of living in the long run, but it screws the group of people who now have obsolete skills and no employment. A progressive reform would be to help as many people as possible retrain their skills for new employment; while this would be an imperfect solution to a fundamental problem of an evolving free-market economy, it is a more productive use of the money than many other plans.

[vjoseph]

He pointed that out today. He actually said the exact same thing as you did

[harriscrl3]

Oh right our economy is going into the toilet . But hey why sweat the big stuff when it so much fun to focus on the petty.

Carol

[CitizenJ]

Seriously. Why doesn't he talk more about Blagojevich? I listened to Mika and Joe this morning and they still aren't satisfied, so there is hell to pay.

[keepitreal50]

Because he is obviously not involved, has no direct knowledge of the crimes committed and it is under investigation. Where have you been when he told the United States of America this. I guess some people just want to find out what is wrong instead of whats' right. Obama has nothing sticking to him even a little. The man has more dignity, respect and far superior CHARACTER than the two bozos he and Biden are watching run for cover. Why don't you ask president Bush and vice pres. Cheney why they are not in jail or sitting in court for what they DID wrong? That's whats right!!! There's alot of genius in your question. LOL. Obama/Biden 08 (disinfecting the oval office)

[Marlyn]

Why don't you stop listening to Mika and Joe?

[macbabe]

no kidding...­. and his hands are tied, he can do nothing until Jan 20th but watch it keep failing, the frustration has to be aging him, this too shall pass.

[vjoseph]

NO, lets continue to bicker and fight, because you know, its more fun and it distract us from the more important things. We don't want to be bothered by those important things because they are not sexy enough or something like that

[Tulka2]

Is Obama listening to poor people? Or is he surrounded by experts who think they know how to hang onto their own money? Maddoff, Maddoff, Maddoff. Just to put things in perspective. I'm just saying.

[macbabe]

if you have been paying attention at all, you would know he is listening to EVERYONE!

[Tulka2]

Do you think i am not being loyal enough to our homeroom..­..? I am a progressive and it is my job to hold Obama's feet to the fire of the disaster down here on the street. FDR would never have gone so left if it were not for progressives and the circumstances of the times.

[commonsensor]

"And so, look -- I'm a taxpayer like everybody else, and I don't want to see money wasted."

I see! Then why did you so giddily jump on the bandwagon to hand a bunch of ponzi scammers and wall street cretins a blank check for $700 BILLION dollars. No questions asked?

Here's a crazy thought: Maybe if the Democrats hadn't pushed so hard for their friends on Wall Street there would actually be something left to fix the economy with.

[SCG]

What's that saying about repeating the same policies, but expecting different results?

[chuk98death]

When last did we invest in infastructure?

[satyriasis]

In the late 80's and 90's. It gave us the internet. We'd be in a better position now had we been investing in infrastructure for the past decade. Instead money was miss allocated to housing, war, SUVs, and tax cuts.

[burndtdan]

On this scale? When we built the highway system?

Just guessing.

[CitizenJ]

We haven't invested in much in a long time. We've spent, but we haven't invested. We've cut spending on education, which is an investment, and we sent it to Blackwater and Halliburton. We've refused to invest in green technology and given tax breaks to oil companies, thereby losing valuable revenue to finance a finite and dirty energy source. You name it, we have it backwards.

And that's fine - just don't let gay people get married. That's what's important.