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Obama Connects Most of the Dots

Obama at Georgetown today. (Brendan Smalowski/Bloomberg News)

Aware that many Americans are wondering how all his different economic programs and policies fit together, President Obama today tried to connect the dots.

He explained why he believes each of his various short-term economic initiatives is a critical element of the economic recovery, how his ambitious long-term budget proposals are essential to building an economy that won't crash like this one did, and that, although some initiatives are already producing glimmers of hope, most of the hard work still lies ahead.

At the heart of a forceful speech delivered at Georgetown University, Obama placed powerful biblical imagery from Jesus's Sermon on the Mount, likening the boom-and-bust economy he inherited to a house built on sand and the future U.S. economy he is working toward one built on a rock.

He strongly rebutted the criticism, largely from Republicans, that he shouldn't be spending so much either now or in the long term. He noted how it is economic common sense that "the last thing a government should do in the middle of a recession is to cut back on spending." And, in an analogy that resonated particularly well with an audience heavy on college students, he talked about the need to invest in the future.

"Look, just as a cash-strapped family may cut back on all kinds of luxuries but will still insist on spending money to get their children through college -- will refuse to have their kids drop out of college and go to work in some fast food place, even though that might bring in some income in the short term, because they're thinking about the long term -- so we as a country have to make current choices with an eye to the future."

He stressed his dedication to what he called the "five pillars" of his new "house upon a rock": "Number one, new rules for Wall Street that will reward drive and innovation, not reckless risk-taking. Number two, new investments in education that will make our workforce more skilled and competitive. Number three, new investments in renewable energy and technology that will create new jobs and new industries. Number four, new investments in health care that will cut costs for families and businesses. And, number five, new savings in our federal budget that will bring down the debt for future generations."

He even suggested that entitlement reform -- including putting Social Security "on firmer footing" -- and tax reform would be on his agenda after those other issues were addressed.

But he failed to persuasively rebut the most urgent critique of his economic policies -- one that can't be written off either to reflexive partisanship from Republicans or defensiveness from the Washington establishment.

Obama raised it on his own, noting that some critics think he has "been too timid" about shoring up the banking system. "This is essentially the nationalization argument that some of you may have heard. And the argument says that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks and that our failure -- my administration's failure -- to do so is yet another example of Washington coddling Wall Street: 'Why aren't you tougher on the banks?'"

But his answer was vague and unconvincing: "So let me be clear. The reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks. It's certainly not because of any concern we have for the management and shareholders whose actions helped to cause this mess. Rather, it’s because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it’s more likely to undermine than create confidence."

Obama's belief has never been in question. It's the reasoning behind that belief that we've been missing, as well as the source of his faith in the judgment of economic advisers. But he once again left us all in the dark on that count.

Obama ended his speech with his most extensive critique yet of the weak-willed and easily distracted Washington establishment whose support he needs to get his agenda put into law. He called on leaders to toughen up and act in a sustained fashion.

"For too long, too many in Washington put off our decisions for some other time on some other day. There has been a tendency to spend a lot of time scoring political points instead of rolling up sleeves to solve real problems. There's also an impatience that characterizes this town, an attention span that has only grown shorter with the 24-hour news cycle, that insists on instant gratification in the form of immediate results or higher poll numbers.

"When a crisis hits, there's all too often a lurch from shock to trance, with everyone responding to the tempest of the moment until the furor has died down and the media coverage has moved on to something else, instead of confronting the major challenges that will shape our future in a sustained and focused way. This can't be one of those times: the challenges are too great; the stakes are too high.

"I know how difficult it is for members of Congress in both parties to grapple with some of the big decisions we face right now. I'd love if these problems were coming at us one at a time instead of five or six at a time. It's more than most Congresses and most presidents have to deal with in a lifetime.

"But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility to ourselves, to the men and women who sent us here, to the many generations whose lives will be affected for good or for ill because of what we do here."

By Dan Froomkin  |  April 14, 2009; 2:10 PM ET
Categories:  Financial Crisis  
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Comments

I don't know where he is applying his "working smarter" in all this, easy to just spend and say you'll balance the budget later. It scares me some the way he puts a trance in people including myself. I think he should end the toxic loan business, not help in financing for others to buy the stock, thus making the terms of those loans affordable--end the problem not make it in a fantasyville solution in a shopping spree. People wondered what those cds's and cdo's were worth, I tell you, their liquid asset value and that is the land sitting over their among the weeds because the payments were too high for the people. Doesn't cost money to rewrite the terms, why spend trillions based on this perpetual problem?

Posted by: bwcolq | April 14, 2009 3:03 PM | Report abuse

Again Froomkin is right on the money: the bank bailout is the one real Achilles heel of Obama's recovery efforts. No rational citizen likes the idea of increasing the national debt, but given the currently castrophic economic conditions (created mostly by "Conservative" policies over the past 30 years, whether implemented by Republicans or Democrats) there is no real alternative. Allowing the economy to wallow in recession also would increase the national debt, but we would get there more slowly and painfully. As for the bank bailout, the reason for its timidity is that Republicans, bankers and general business lobbies still wield enough clout to undermine any policy, like temporary nationalization, that would address the problem more surgically. The problem of the persistence of political power by the moneyed interests is the real reason why Obama's bank bailout is timid.

Posted by: rjoff | April 14, 2009 3:29 PM | Report abuse

Froomkin you idiot... you provide no real analysis here. You are just parroting Obama's main points of his speech. Where is the questioning??

How can Obama say the 5th pillar of his house is "new savings in the Federal Budget that will bring down debt in the future?? "

His damn budget shifts the budget deficit so far into the red that even after his proposed 10 years, the 10th year deficit will still be much more than the average yearly deficit from the last 4 years of the Bush's administration. How can this be allowed to stand?

Oh wait, I know.... because Obama says "Hope and Change," and you fall head over heels in love with him.

Posted by: alutz08 | April 14, 2009 3:41 PM | Report abuse

As long as Obama keeps talking to the country he will do fine. He cannot go into a shell like GW, he needs to keep telling us that they are working on something. As long as somebody is doing something we can all accept more setbacks, understand that everything they try won't work, understand that we have to keep going, etc. We can't have another dolt stand up and say the fundamentals are sound, then run for cover.

Posted by: stanbarkley | April 14, 2009 3:43 PM | Report abuse

Why doesn't Pres. Obama just read the transcript(s) or listen/watch the videos of the 2part interview that Noam Chomsky did with Amy Goodman, recorded last week and pt.2 played this morning. www.democracynow.org ?

Posted by: NYCartist | April 14, 2009 3:46 PM | Report abuse

Renewable energy technology will eliminate more jobs than it creates. Indeed, that should be the idea--if we are more efficient, then we should need less labor devoted to these ares (e.g. mining coal).

Can I presume that the President understands that you cannot effectively retire an entire industry and replace it with a new one without isntilling some serious economic hardship? I hope he is not merely mesmerized by the (hypothetically) clean energy lobby touting its free lunches.

Every dollar that goes into R&D needs to be matched with funds for training or moving displaced workers. This will even out income disparities much more efficiently than transfer payments. You'd think that decades of globalization woudl have taught us something.

The Administration needs to take a hard look at all efficient technology to sort out the truth from the propaganda. In practice, wind has been extremely disappointing; incerdibly, many elementary engineering problems are still not worked out. Certain technologies like hybrids and compact fluorescents potentially will lead to as or more serious environmental disasters than they purport to alleviate. Presumably somebody is thinking about all this and the Administration is not allowing such important problems to be "greenwashed" by lobbyists. (See, I am trying to be "hopeful")

Posted by: Wallenstein | April 14, 2009 3:54 PM | Report abuse

Um, Alutz08, you may have missed this paragraph:

"Obama's belief has never been in question. It's the reasoning behind that belief that we've been missing, as well as the source of his faith in the judgment of economic advisers. But he once again left us all in the dark on that count."

That counts as analysis in my book: listening to Obama's speech, isolating one part of it (the explanation on his handling of insolvent major banks), and stating what, in his opinion, the explanation lacked.

Seems you're a little overeager to criticize Froomkin. Work on your reading comprehension, bud. As in, read a little more slowly, with a bit more patience.

It's a little reminiscent of conservatives' idiotic response to Obama's talk of nuclear disarmament while overseas: they seized on "disarmament" and "nuclear-free world" and either didn't read, or willfully ignored, the rest of the statement about the decades and difficulties involved. Nor did they choose to comprehend the difference between the spread of nuclear weapons, and the threat of nuclear annihilation.

It's hard to read the news, when reading the news means suffering so many fools.

Posted by: whizbang9a | April 14, 2009 3:55 PM | Report abuse

@alutz08: "the 10th year deficit will still be much more than the average yearly deficit from the last 4 years of the Bush's administration."

>_<

Good christ you wingnuts are dense. Would you be happier if Obama went back to Bush's accounting rules so the deficit LOOKS smaller? War? What war? No red ink here! Is that really what you need to feel safe? Most people prefer to know the whole truth for better or worse. But then again, most people these days aren't Republicans.

Posted by: BigTunaTim | April 14, 2009 4:18 PM | Report abuse

--'But his answer was vague and unconvincing: "So let me be clear. The reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks. It's certainly not because of any concern we have for the management and shareholders whose actions helped to cause this mess. Rather, it’s because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it’s more likely to undermine than create confidence."'

What do you find unclear about this? They weighed nationalization of the banks and decided not to--and not just for political reasons. Weigh each word you quote and think about it some more.

In my opinion nationalization of all banks and companies would be a good, sound, practical, idea. (It has been a lifetime since I've seen any good ideas from America's mega-multinational companies: they are big, slow and stupid, so why can't the government with new policies compete with efficient management? Okay, call me a "liberal".) This said, you can't fault Obama for his justifications quoted for his policy.

Posted by: walden1 | April 14, 2009 4:24 PM | Report abuse

I haven't been reading Froomkin ever since he has been cast in this ridiculously short abrdiged version. I miss the old format where he referred to various reporters/columnists/news outlets, and commented on that reportage.

As to Obama, I never bought into his hype, I cannot understand this trillions of dollars of money being lavished on people who essentially failed. Bush famously wasted billions. Obama is doing one better.

Any body looked at a George Bush to Barack Obama morph? You can see it at http://tinyurl.com/c5ggdr

Posted by: pKrishna43 | April 14, 2009 4:45 PM | Report abuse

Perhaps someone should recognize that the large banks are "owned" by shareholders, not by the federal government, which, as exhibited by the mismanagement of Fannie and Freddie, should not be in the banking/mortgage business. The mistake made in the waning days of the Bush administration and continued in the Obama administration is that banks, car manufacturers should be bailed out. Why does the mechanism of bankruptcy exist? Moreover, banks that didn't want the TARP money were forced to take it, and now the Obama administration won't let them return the money. Why--is it a control issue for the administration?

Posted by: judithod | April 14, 2009 4:50 PM | Report abuse

How Obama Can Help The Economy
The Stock Market is still way down and the jobless rate continues to slide into negative territory since prior to Obama's election. Both are voting No to Obamas various schemes and he continues to not get it. Irresponsible federal spending, Cap & Trade programs that will hurt manufacturing, increased taxes that will stifle small business job creation, threats of more regulation, planned Federal Judge appointments that are not favorable to tort reform and a host of other ideas are not the sort of things that make the business community feel optimistic. In addition, all of Obamas talk of big changes and government solutions mean that business can't clearly plan so they wait, shrink and posture their business plans in a defensive manner.
The fact that Obama either does not care or does not understand that he is scaring the hell out of the U.S business community is nothing short of amazing, given that he seems like a bright fellow.
A promise of fiscal responsibility, predictably constant taxes, no cap & trade schemes, judicial appointments that are not activist in nature, and a level or reduced capital gains tax is what will turn the market around and get business hiring again.

Posted by: smokedsalmoned | April 14, 2009 5:26 PM | Report abuse

Reexamining The New Deal.
With calls for a new New Deal by the Obama Administration we need to look carefully before we try out policies that did not work the first time around.
Some people, but not most economists & historians, seem to think that the New Deal ended the Depression. First, one must remember that after the Stock Market Crash in 1929 President Hoover increased federal spending by more than 50% and put pressure on companies to keep wages fixed. At the same time, he was building protectionist trade tariffs he increased our top income tax rate from 25% to 63%, which sounds eerily familiar. Secondly, in 1933 FDR became president, with unemployment at 17.2% and pursued the New Deal, raising federal spending, implementing income taxes with extremely high progressive tax brackets, encouraged strong unions and higher wages than lagging productivity justified, on the theory that workers' spending would be simulative. Instead, corporate profits — prerequisites for job-creating investments — were excessively drained into labor expenses that left many workers priced out of the market. Thirdly, In 1937, 5 years into the new deal and 8 years after the stock market collapse the biggest industrial collapse occurred in 1937!.
Unemployment in America only declined when America began selling materials to nations engaged in a war America would soon join.
Obama proposes similar governmental rescue plans for our economy and the middle class. His proposals include a tax credit for businesses "for each new employee they hire" in America over the next two years. The assumption is that businesses will create jobs that would not have been created without the subsidy. If so, the subsidy will flood the economy with inefficiencies — labor costs not justified by value added. In addition, as Hoover and FDR did, he will increase taxes, spending and raise protectionist trade tariffs, all programs that are strongly argued against by historians with economic backgrounds and by pure economists.
Those who forget history are doomed to repeat it and it appears Obama is about to do just that.

Posted by: smokedsalmoned | April 14, 2009 5:27 PM | Report abuse

Regarding all the criticisms of President Obama's response to the current economic crisis, let's have a raise of hands from all the posters (Dan included) who would like to resurrect former President Bush and his economic advisors (including Henry Paulson) as "experienced" consultants. After all, they have a lot in common with the Wall Street bigshots who presided over the creation of this mess, and are now receiving stimulus money to rectify their mistakes ( the well worn, blame-neutral phrase "mistakes were made" comes to mind). Or, do we invite more chaos by dumping Obama's economic braintrust? Obama is a bright man, but he is dependent on staff advice.

President Obama's worst decision may have been his reincorporation of Clinton era "retread" economists into his administration, which probably has a lot to do with his "timid" approach to nationalizing financial institutions (the exception to the retread mode is Treasury Secretary Geithneer, who was closely involved with Paulson in the initial bailout effort during the last days of the Bush administration, but his opinion merely echos that of the "retreads").

Posted by: MillPond2 | April 14, 2009 6:26 PM | Report abuse

Alutz wrote: "the 10th year deficit will still be much more than the average yearly deficit from the last 4 years of the Bush's administration."

Bush's budgets were downright fraudulent, given that he notoriously refused to write down the costs of his wars.

Moreover, Bushonomics created an economy that spectacularly imploded. So even a president who runs a higher deficit is doing better than Bush, if his economy doesn't blow up and crash in flames.

Posted by: kevrobb | April 14, 2009 6:40 PM | Report abuse

smokedsalmoned: A bunch of anti New Dealers like yourself all spouting the same ideological nonsense at the same time cannot re-write history. It did not work for the Communists, who devoted more person power to re-writing history than even the Republican party does, and it will not work for you either. Spending by the New Deal dropped unemployement by 10 points, before an attempt to balance the budget in 1937 aborted the recovery. And spending by FDR on World War II brought employment effectively down to zero. There have been only two times since World War I when the Republican Party controlled all the branches of the federal government: the first time was the 1920's and the second time was under George W. Bush. Not surprisingly, both times ended in economic catastrophe.

Posted by: rjoff | April 14, 2009 7:06 PM | Report abuse

spending on World War II brought unemployment effectively down to zero

and despite the huge deficits that resulted, World War II was accompanied and followed by the largest and most sustained economic boom in U.S. history, with the deficits eventually reduced to a manageable size

Posted by: rjoff | April 14, 2009 7:10 PM | Report abuse

One particular trait about Barack Obama that stands out is that, whether or not he is a Socialist, he is first and foremost an incrementalist. Once he decides to devour the camel, he keeps chewing until he gets the results desired. If that means that he ends up swallowing it from lips to tail he will do it, although if he can get his point with a few less calories he won't insist on eating the whole thing. If he can get the banking mess straightened out without actually nationalizing the lot, he won't nationalize the lot, but if it takes taking over every bank in the country, he is willing to do it.

Incrementalists aren't as dramatic as duh deciders, but they are far more effective. They are also usually far more efficient because they arrive at their destination able to stop at the line, instead of overshooting, overshooting again on the correction, and so on. Incrementalists don't waste a lot of energy in a hysteresis loop about their intended target.

He has shown enough competence to warrant the faith we need to let him take a bit more time and do the job right the first time.

Posted by: ceflynline | April 14, 2009 7:37 PM | Report abuse

Of course, the particular irony of Obama's situation is the that the bank bailout was inherited from Paulson and the Bush administration. Granted, Bush probably didn't understand it, but once the course had been set, the downside of dropping this approach was probably too great for Obama to take the risk.

So we now get to hold our collective breath, dependig on on how much junk Citi and B of A have tried to hide, or if -- now that they and their Congresional dupes faced down the poor accountants -- they can succesfully continue to hide it.

Posted by: thaimex | April 14, 2009 10:41 PM | Report abuse

Looking at the multitude of mindless, almost identical, hostile comments that are posted here day after day, attacking Froomkin more than they attack Obama, I can't help but think that Froomkin has become the target of a concerted campaign by the Bushies and their ilk to discredit him and drive his blog from the Wash Po, to remove one counterweight to Krauthammer, Gerson, Parker, etc., etc.

Posted by: bfieldk | April 15, 2009 12:45 AM | Report abuse

Oddly, in a column that rightly criticizes the President for being too vague, Froomkin is too vague. His usually well-sourced, linked-in prose is sparse & doesn't even cover the main lefty criticism -- the Administration's refusal to take control of (or "nationalize") the banks in which we taxpayers (Happy April 15!) have a big-percentage interest. The President's whole answer to this criticism -- leveled by the nation's most highly-respected economists -- was, "Uh, taking over the banks could be costly because it would make them look bad." Yeah, right. They already look bad to me -- as far as I can tell, the nation's too-big-to-fail banks are all (a) insolvent; (b) crooks; or (c) both of the above.

The Constant Weader at RealityChex.com

Posted by: marieburns | April 15, 2009 6:54 AM | Report abuse

Obama Taxes = Depression
Under Obama's plan he will raise taxes by over 800 billion dollars, once we swallow the stimulus bait, in an economy that may be on the verge of going into a recession while the Stock market seems to teeter on the brink. Does he not know enough about history that he does not remember Herbert Hoover?
In 1929 an Herbert Hoover raised taxes in the midst of an economic and Wall Street crisis. Economists will tell you that that piece of genius made a bad recession roll over into the Great Depression. Here we are a mere 80 years later and Obama has forgotten this devastating lesson from history.
At the same time he will spend far more than that per year in his first four years as president, destroying the value of the U.S. dollar. Perhaps we too will soon be using wheelbarrows full of money to pay for a loaf of bread.
Historical precedent is why the EU President calls Obamas tax and spend plans "the path to hell" and why even France and Germany are actively calling for Obama to reverse course.

Posted by: smokedsalmoned | April 15, 2009 8:32 AM | Report abuse

Obama's actions have agreed with his rhetoric on most subjects. Since he won the election (as did his party) he has the mandate to do what he is doing.

The glaring exception is the handling of the financial industry. He talks about fundamental change but his appointees are just continuing the Goldman-Sachs-friendly policies of Henry Paulson.

Posted by: skeptonomist | April 15, 2009 9:23 AM | Report abuse

Please give him a chance... but keep the pressure to fix the Tax Code and Corporate Governance. Without these two there is no sustainable progress to show for the money we are throwing at the problem.


PS: Speaking of jobs... US Govt is hiring like crazy, but it is a convoluted and cumbersome process that does now work for job seekers. Perhaps the POTUS can fix that.

Posted by: DemInCo | April 15, 2009 10:09 AM | Report abuse

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