WASHINGTON – President Barack Obama moderated his rhetoric about bonuses to executives at bailed out AIG Tuesday night, saying he was as angry as anyone at the payments but adding, “We can’t afford to demonize every investor or entrepreneur who tries to make a profit.”
At the second prime-time news conference of his presidency, Obama also cast his budget – now under review in Congress – as essential if the economy is to emerge from the severe recession. The tax and spending plan “is inseparable from this recovery because it is what lays the foundation for a secure and lasting prosperity,” he said.
The news conference came at a pivotal, early moment in Obama’s young presidency, with Democrats in Congress readying budget proposals that will largely determine how much of his first-term agenda will be passed, Treasury Secretary Timothy Geithner churning out near-daily proposals to solve the nation’s economic crisis and the administration struggling with public and congressional outrage over bonuses paid to executives of bailed-out AIG. Additionally, Obama departs next week for his first European trip as commander in chief, with the global economy a major focus.
Speaking in the East Room of the White House, Obama put in a plug for the request Geithner made to Congress earlier in the day for extraordinary authority to take over failing companies like American International Group Inc., much as the Federal Deposit Insurance Corp. now does for banks.
“It is precisely because of the lack of this authority” that AIG’s problems threatened to bring down the entire U.S. economy, he said. Top Democrats in Congress reacted positively to the proposal, although it is not clear when legislation might be considered.
Obama has been vocal in his unhappiness over the $165 million in retention bonuses paid to executives at AIG, although his favorable reference to business men and women seeking profits was a new twist.
The president opened the news conference with a lengthy prepared statement read from a teleprompter.
Briefly reviewing the steps his administration has taken to date, he said teachers and others have jobs today because of the economic stimulus measure that Congress passed, and the nation is “beginning to see signs of increased sales and stabilized housing prices for the first time in a long time.”
At the same time, he said full-fledged recovery is months away, adding, “it will take patience.”
He also said his administration was taking steps to make sure banks have money to lend “even if the economy gets worse.”
Obama said he did not feel the government should call on Americans to make sacrifices beyond those imposed by the recession and credit crisis. “Folks are sacrificing left and right … across the board, people are making adjustments large and small,” he said.
Obama was quick with a retort when asked about Republican criticism of his budget, with its huge projected deficits.
“First of all,” he said he inherited a deficit of over $1 trillion from his predecessor. And secondly, he said the Republicans have yet to offer an alternative to his own tax and spending plan.
Obama has emphasized a desire to cut projected deficits in half by the end of his current term, although recent estimates make it appear almost impossible barring an extraordinary series of events.
Given concern in Congress over the red ink, Senate Democrats are drafting a separate budget plan that assumes Obama’s proposed middle class tax cut expires after two years – the sort of sleight of hand that other administrations of both parties have used in the past.
While Congress’ budget does not go to the White House for a president’s signature, the White House traditionally seeks to influence its provisions. Obama restated his objectives Tuesday night – health care overhaul, a new energy policy and more money for education and deficit control.
Obama stepped to the microphone one day after his administration unveiled a plan to melt the credit freeze by helping banks shed bad loans. Under the proposal, the government will finance the purchase by private investors of as much as $1 trillion of the $2 trillion in bad assets still held by the nation’s banks, in the hopes of freeing banks to begin lending more freely and churn up economic activity.
The proposal led to a huge stock rally on Monday, though stocks slipped back somewhat on Tuesday as Wall Street digested all the information.
The administration also is to outline its proposal for a broad overhaul of financial regulations on Thursday when Treasury Secretary Timothy Geithner testifies on Capitol Hill. A key request: greater ability for the government to regulate and even take over the kind of complicated financial companies – like American International Group – whose collapse could threaten the entire system.
But anti-AIG ferocity threatens to undermine Obama’s efforts to bail out the nation’s deeply troubled financial sector, by possibly scaring investors away from the new program and by making it more difficult to wring more bailout money out of Congress.
Obama also is preparing for a European trip next week that includes a London summit on the global economic crisis, while, away from the economy, an announcement is expected by Friday on a revamped U.S. strategy for Afghanistan and Pakistan.
The president took particular care to defend the $3.6 trillion budget proposal that includes his ambitious, all-at-once agenda of increased health care coverage, higher education spending and a new “cap-and-trade” system on greenhouse gases emissions. The blueprint starts its journey through Congress this week, and is encountering opposition and demands for big spending reductions from fellow Democrats as well as Republicans.
On Wednesday, Obama is heading to Capitol Hill to lobby Senate Democrats.
Senate GOP leader Mitch McConnell emphasized Republican criticism of the president’s proposed budget as an over-spending, over-taxing disaster. A Congressional Budget Office analysis released last Friday estimates Obama’s budget would generate deficits totaling $9.3 trillion over the next decade
“If these plans are carried out, we run the risk of looking like a Third World country,” said McConnell, R-Ky.
But Obama repeated his claim that his plans would cut the deficit in half by the end of his first term in 2011 – “even under the most pessimistic estimates.”
“At the end of the day, the best way to bring our deficit down in the long run is not with a budget that continues the very same policies that have led to a narrow prosperity and massive debt,” the president said. “It’s with a budget that leads to broad economic growth by moving from an era of borrow and spend to one where we save and invest.”
Obama’s job approval rating is 63 percent, according to Gallup polling. That number has been relatively stable recently, down from the 68 percent when the president took office mostly on a loss of support among Republicans.
Obama has been in near-constant motion since he assumed the presidency just over two months ago. This week has assumed an especially feverish pitch.
In addition to all the announcements, a long interview with CBS’ “60 Minutes” aired Sunday night. An opinion piece written by Obama also ran in 31 newspapers worldwide on Tuesday, a setup to next week’s meeting of leaders of the Group of 20 largest world economies.
