Obama Cites Grim Economy At Start, as Past Presidents Have

By Michael D. Shear and Michael A. Fletcher
Washington Post Staff Writers
Friday, January 9, 2009

President-elect Barack Obama warned yesterday that the nation is sliding into the deepest economic crisis since World War II and urged Congress to pass a stimulus package quickly or risk an entire generation of Americans losing any hope of prosperity.

In his first major speech since Election Day, Obama participated in an early version of a presidential ritual: preparing the country for an eventual economic recovery by painting an especially grim picture of the nation's fiscal standing at the start.

"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," he told an audience at George Mason University in Fairfax County. "And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

For Obama, the address was the laying down of a political marker, said Andrew G. Biggs, a scholar at the American Enterprise Institute.

"He wants to make clear that coming into his administration that the problems he faces are problems that he inherited," Biggs said. "He does not want to be judged by where the economy ends up in a couple of years, but by from where he started."

In tone and manner, Obama's speech was eerily reminiscent of the early declarations from the past four presidents, who took office warning of economic perils that lay just around the corner.

During his 1981 inaugural address, Ronald Reagan said the United States was "confronted with an economic affliction of great proportions." Eight years later, George H.W. Bush cautioned at his inauguration that "we have a deficit to bring down. We have more will than wallet."

Bill Clinton opened his presidency in 1993 by announcing that the country was "weakened by business failures, stagnant wages, increasing inequality and deep divisions among our people."

And in an early radio addresses in 2001, George W. Bush said that "the stock market is causing worries, high energy prices are straining family budgets, and some workers and small-business people have been directly affected by layoffs and slowing retail sales."

Each of the speeches served to tamp down Americans' expectations about their financial futures, building in ample room for improvement as the new chief executive assumed responsibility for the nation's economic health.

It would be difficult to sugarcoat the current economic dangers on the horizon, and Obama made no attempt to do so, citing a 28-year low in manufacturing, an unemployment rate that could reach double digits and 2 million lost jobs.

"We start 2009 in the midst of a crisis unlike any we have seen in our lifetime -- a crisis that has only deepened over the last few weeks," he said.

The president-elect offered some hopeful words for a nation already growing weary from months of bad economic news. "The very fact that this crisis is largely of our own making means that it is not beyond our ability to solve," he said. "Our problems are rooted in past mistakes, not our capacity for future greatness."

But his comments were punctuated by gloomy reports from the nation's retailers, which said the holiday shopping season was even worse than they had anticipated. Macy's said its sales in December had dropped 7.5 percent from the previous year.

New unemployment claims for the week declined a bit, but economists braced for another spike in job losses when monthly employment numbers are released today.

Analysts expect the jobless rate to increase to 7 percent, from 6.7 percent, and for employers to have cut half a million more jobs. There were 3.2 million more unemployed Americans in November than a year earlier.

Yesterday's speech marked the start of the formal campaign to move through Congress a stimulus package that Obama portrayed as an effort to "retrofit America" -- rebuilding infrastructure while also investing in alternative energy, modernizing schools and extending broadband Internet service to rural areas.

While some details remain vague -- including the total cost of the plan, which could reach $800 billion -- Obama offered some goals that he hopes to achieve: a doubling in the production of alternative energy, modernizing 75 percent of federal buildings, computerizing health records in five years and providing an immediate tax cut of up to $1,000 for Americans.

"I understand that some might be skeptical of this plan," he said. "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."

At a news conference after Obama's speech, Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader John A. Boehner (R-Ohio) said they agreed with the president-elect's diagnosis of the perils presented by the economic recession, but continued to voice doubts about the spending side of the emerging plan.

"The question is, how will the money be spent?" McConnell said, calling the $1.2 trillion estimate of the deficit "eyepopping."

Boehner said the deficit makes it imperative to root out spending in the plan that does not serve the immediate purpose of stimulating the economy, warning that too much spending would wreak long-term havoc. "We can't do one without the other," he said.

In his speech, Obama blamed the current situation on "profound irresponsibility" -- from financial centers such as Wall Street and power centers such as Washington -- and directly confronted the critics of his plan.

He acknowledged the staggering cost of his proposals and the enormous debt it would impose on future generations. To assuage those concerns, Obama pledged "an unprecedented effort to eliminate unwise and unnecessary spending."

"He wants to press the urgency of his stimulus plan," said Dean Baker, co-director of the Center for Economic and Policy Research. "He wants to build the political momentum to get this through Congress quickly."

But already, some of the urgency seems to be cooling. Initially, Obama's economic advisers had hoped to have the stimulus plan through Congress and on Obama's desk shortly after his Jan. 20 inauguration.

But that date has slipped, and Obama now hopes to sign the recovery act in mid-February.

House Speaker Nancy Pelosi (D-Calif.) told reporters yesterday that she plans to hold the vote the last week of January, with House committees considering the legislation the week before Obama is inaugurated.

Under the new timeline, a delay of several weeks from the original timeframe, the Senate would not take up the legislation until the first week of February. Differences would be worked out the week of Feb. 9, with a final vote a week later.

"Whatever day they pass it, it is going to take some time to get the money out of the door," Baker said, adding that the economy's downward momentum increases by the day. "Most economists would like to have been spending money now."

Staff writers Paul Kane and Neil Irwin contributed to this report.

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