Obama Warns Of Deeper Crisis

Barack Obama portrayed the economic crisis in some of his gravest language yet Thursday, exhorting Congress to act or let the country slip into decline in what he said was a watershed moment for America.
Obama, in his first major speech since winning the presidency last year, said the economic crisis presented the nation with a once in a generation challenge.

The president-elect reiterated his proposals for what he’s billing as an American Recovery and Reinvestment Plan, but he was stark in describing the results of inaction

“For every day we wait or point fingers or drag our feet, more Americans will lose their jobs,” Obama said, speaking at Fairfax, Va.’s George Mason University and surrounded by the flags and formality of a presidential event. “More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.”

To address the problem, Obama laid out some of the goals he’ll tie to the massive spending package he hopes to sign into law next month.

He proposed: Doubling the production of alternative energy by 2012, modernizing over 75 percent of federal buildings and improving energy efficiency of 2 million homes, and ensuring that, within five years, every American’s medical records are computerized. 

But his goal was clear — to shock Americans into embracing a second round of massive economic stimulus, even though many are dubious that the first multi-billion shot in the arm actually accomplished anything for the average family. 

Obama warned that the economy “could become dramatically worse” and face unemployment above 10 percent without bipartisan support for a massive government stimulus program that would temporarily add to the record federal budget deficit but would “save or create at least 3 million jobs over the next few years.”

“It is time to set a new course for this economy, and that change must begin now,” Obama said at George Mason University in Fairfax, Va.

The speech is the most dramatic, sobering element so far in what aides promise will be a long and continuing conversation between Obama and the nation about the dire state of the economy and the necessary solutions.

Coming 12 days before his inauguration, the speech is designed to put pressure on Congress to act within weeks on complex legislation that normally would take months of debate and hearings. But Republicans are warning against undue haste, and can be expected to refer to it in television appearances as “a trillion-dollar spending bill,” even though $300 billion of the $775 billion total — 40 percent — is slated to go for tax cuts to businesses and the middle class.

In comments aimed at leveling with Americans that the worst is yet to come, Obama says: “Only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy.” 

The president-elect acknowledges “that some might be skeptical of this plan,” but promises not to “just throw money at our problems,” but instead “invest in what works.”

“Our government has already spent a good deal of money, but we haven’t yet seen that translate into more jobs or higher incomes or renewed confidence in our economy,” he said. “The true test of the policies we’ll pursue won’t be whether they’re Democratic or Republican ideas, but whether they create jobs, grow our economy, and put the American Dream within reach of the American people.”

Obama also says his “American Recovery and Reinvestment Plan” is only the starting point for his plan to restore e economic stability. He also talks of:

—“a sweeping efort to address the foreclosure crisis so that we can keep responsible families in their homes.”

—“preventing the catastrophic failure of financial institutions whose collapse could endanger the entire economy, but only with maximum protections for taxpayers and a clear understanding that government support for any company is an extraordinary action that must come with significant restrictions on the firms that receive support. “

—And “reforming a weak and outdated regulatory system so that we can better withstand financial shocks and better protect consumers, investors, and businesses from the reckless greed and risk-taking that must never endanger our prosperity again.”

The transition’s précis on what it calls “a major speech on the economy” says: “He will make the case for urgent action on an American Recovery and Reinvestment Plan that will save or create over 3 million jobs while investing in priorities like health care, energy, and education that will jumpstart economic growth. This plan will represent not just new policy, but a new approach to meeting our challenges that focuses on responsibility, accountability, and transparency so that we can rebuild confidence and trust in our economy and our markets.”

Here are the excerpts released by Obama aides:

I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for the jobs of the future. And our nation could lose the competitive edge that has served as a foundation for our strength and standing in the world.

In short, a bad situation could become dramatically worse.

***
There is no doubt that the cost of this plan will be considerable. It will certainly add to the budget deficit in the short-term. But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes, and confidence in our economy. It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy – where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit.

That is why we need to act boldly and act now to reverse these cycles. That’s why we need to put money in the pockets of the American people, create new jobs, and invest in our future. That’s why we need to re-start the flow of credit and restore the rules of the road that will ensure a crisis like this never happens again.

That work begins with this plan – a plan I am confident will save or create at least three million jobs over the next few years. It is not just another public works program. It’s a plan that recognizes both the paradox and the promise of this moment – the fact that there are millions of Americans trying to find work, even as, all around the country, there is so much work to be done. That’s why we’ll invest in priorities like energy and education; health care and a new infrastructure that are necessary to keep us strong and competitive in the 21st century. That’s why the overwhelming majority of the jobs created will be in the private sector, while our plan will save the public sector jobs of teachers, cops, firefightersand others who provide vital services.
***
I understand that some might be skeptical of this plan. Our government has already spent a good deal of money, but we haven’t yet seen that translate into more jobs or higher incomes or renewed confidence in our economy. That’s why the American Recovery and Reinvestment Plan won’t just throw money at our problems – we’ll invest in what works. The true test of the policies we’ll pursue won’t be whether they’re Democratic or Republican ideas, but whether they create jobs, grow our economy, and put the American Dream within reach of the American people.

Instead of politicians doling out money behind a veil of secrecy, decisions about where we invest will be made transparently, and informed by independent experts wherever possible. Every American will be able to hold Washington accountable for these decisions by going online to see how and where their tax dollars are being spent. And as I announced yesterday, we will launch an unprecedented effort to eliminate unwise and unnecessary spending that has never been more unaffordable for our nation and our children’s future than it is right now.

***

Now, this recovery plan alone will not solve all the problems that led us into this crisis. We must also work with the same sense of urgency to stabilize and repair the financial system we all depend on. That means using our full arsenal of tools to get credit flowing again to families and business, while restoring confidence in our markets. It means launching a sweeping effort to address the foreclosure crisis so that we can keep responsible families in their homes. It means preventing the catastrophic failure of financial institutions whose collapse could endanger the entire economy, but only with maximum protections for taxpayers and a clear understanding that government support for any company is an extraordinary action that must come with significant restrictions on the firms that receive support. And it means reforming a weak and outdated regulatory system so that we can better withstand financial shocks and better protect consumers, investors, and businesses from the reckless greed and risk-taking that must never endanger our prosperity again.

No longer can we allow Wall Street wrongdoers to slip through regulatory cracks. No longer can we allow special interests to put their thumbs on the economic scales. No longer can we allow the unscrupulous lending and borrowing that leads only to destructive cycles of bubble and bust.

It is time to set a new course for this economy, and that change must begin now. We should have an open and honest discussion about this recovery plan in the days ahead, but I urge Congress to move as quickly as possible on behalf of the American people. For every day we wait or point fingers or drag our feet, more Americans will lose their jobs. More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.