Obama: Budget, Recovery 'inseparable'

President Barack Obama used a prime-time news conference Tuesday to try to convince Americans that his budget and policy prescriptions are exactly what’s needed to get nation’s economy back on track, despite criticism from both parties in Congress.

“This budget is inseparable from this recovery,” Obama insisted. “It is what lays the foundation for a secure and lasting prosperity.”

At the same time, Obama sought to temper some of the public anger over bonuses paid to employees at the failed insurance giant AIG – saying that while it’s understandable, it shouldn’t lead to punitive measures that stymie the economic recovery.

“I'm as angry as anybody about those bonuses that went to some of the very same individuals who brought our financial system to its knees,” Obama said. “The days of outsized rewards and reckless speculation that puts us all at risk have to be over….At the same time, the rest of us can't afford to demonize every investor or entrepreneur who seeks to make a profit.”

Obama even showed a brief flash of anger when a CNN correspondent, Ed Henry, pressed for him an answer on why he didn’t alert the public right away to the politically explosive issue of impending bonuses to AIG executives. “It took us a couple of days because I like to know what I’m talking about before I speak,” the president said curtly.

Even as many in Congress and in the public are resisting the idea of more help for Wall Street, Obama predicted success for that his administration’s latest major request, a plan to give federal regulators power to take over large finance companies that get into trouble.

“I think that there's going to be strong support from the American people and from Congress to provide that authority,” he said. Obama tried to put into personal terms the dangers of the failure of a large insurance firm like AIG, noting that AIG’s collapse would jeopardize pension funds and 401(k)s.

But if viewers tuned in to see their president pound the podium in anger about AIG’s $165 million in bonuses, they would have been disappointed. In fact, his answers – even on AIG and the financial meltdown – were subdued, verging on the professorial. At times, he laid out in painstaking detail how he believed the nation got into this mess, and how his plan would get it out. He even delved into the complexities of procurement reform, and “out-year” budgeting.

Obama was most animated in talking about his budget – a topic that’s rarely the topic of kitchen-table conversation in most American homes – but which he clearly sees as essential to the economic recovery.

He pushed Congress to get his $3.6 trillion spending plan put in place largely unchanged, defending its effort to raise taxes on wealthy taxpayers and a bevy of new spending on everything from energy, to education to health care.

At one point, he posed his budget as all that’s standing between recovery and a decline in the American way of life.

“The alternative is to stand pat and to simply say we are just going to not invest in health care, we’re not going to take on energy, we’ll wait till the next time gas gets to $4 a gallon, and we’ll not improve our schools and allow China or India or other countries to lap our young people in terms of their performance. And we’ll settle on lower growth rates, and we’ll continue to contract, both as an economy and in our ability to provide a better life for our kids,” Obama said.

“That I don’t think is a better option.”

Still, both parties are beginning to take apart his budget in key respects.

Senate Budget Committee Chairman Kent Conrad (D-N.D.), who has expressed concerns about rising deficits, released his own budget plan Tuesday calling for an end to Obama’s “Make Wor Pay” tax credit of $400 for most taxpayers after 2010.

Meanwhile, the House Budget Committee Chairman John Spratt (D-S.C.) is reported to oppose using the budget process to deal with Obama’s cap-and-trade plan on climate change. That could doom the plan by opening it to a Republican filibuster. Spratt is endorsing use of the so-called reconciliation process to advance another key Obama priority: health care reform.

Obama also defended his plan to limit charitable and mortgage deduction for families making more than $250,000 a year, saying he did not believe it would seriously cut into donations, as charities claim.

“There’s very little evidence that this has a significant impact on charitable giving,” he said. “I’ll tell you what has significant impact on charitable giving is an economic crisis. . .,” he said.”

Later, he was asked whether race factored into any of his decision making in the White House. “The last 60 days has been dominated by me trying to figure out how we’re going to fix the economy, and that affects black, brown and white.”

He also said the talk of racial healing that surrounded his inauguration “lasted a day” and then it was back to work.

There was no discussion of Iraq or Afghanistan. Iran came up only as Obama derided critics who he said expected an immediate response to the video message he recently released.

However, on the Middle East, Obama seemed to endorse the premise of a question suggesting that the likely election of hard-line officials to lead Israel would complicate peace efforts. Stephen Collinson of Agence France Presse asked Obama if he had concerns about the impact of leaders such as Benjamin Netanyahu as Israel’s new prime minister, who has not endorsed a so-called two-state solution, and of Avigdor Lieberman, who “has been accused of insulting Arabs.”

“It’s not easier than it was but I think it’s just as necessary,” Obama replied. “We don’t yet know what the Israeli government is going to look like and we don’t yet know what the future shape of Palestinian leadership is going to be comprised of. What we do know is this that the status quo is unsustainable.”

Returning to the budget, Obama scoffed at Republicans who have criticized him for accepting deficits of half a trillion dollars even in the so-called out years towards the end of the 10-year budget cycle.

“I suspect that some of those Republican critics have a short memory. As I recall I’m inheriting a $1.3 trillion deficit--annual deficit from them,” he said, before turning to another pitch for the policy initiatives contained in his budget.

“If we don’t tackle energy, if we don’t improve our education system, if we don’t drive down the cost of health care…then, we won’t grow 2.6 percent, we won’t grow 2.2 percent,” Obama said. “We won’t grow.”

Obama insisted that his budget will constrain the deficit once the stimulus needed to restart the economy takes full effect. “We have made the tough choices necessary to cut our deficit in half by the end of my first term – even under the most pessimistic estimates,” he said.

In fact, many of the “tough choices” are still to come. So far, in keeping with past practice for new presidents, Obama has submitted only a budget outline, without line-by-line details for most programs. That information is expected in early May. While Obama did propose hiking tax rates back to Clinton-era levels and limiting deductions for upper-income taxpayers, most of the tax hikes and efforts to slow spending growth don’t kick in until the last couple years Obama’s first term or thereafter.

Obama also counseled patience on issues ranging from limiting the influence of lobbyists, reducing budget pork, and achiving peace in the Middle East.

The president said he hoped that in a few years Americans would conclude: “This is a big ocean liner. It’s not a speed boat. It doesn’t turn around immediately, but we’re in a better place because of the decisions that we’ve made.”