Obama Touts Investing With 'Long-Term Perspective'
Tuesday, March 3, 2009; 4:57 PM
President Obama, seeking to boost public confidence in his economic recovery plan and U.S. markets, suggested today that now is a good time for investors with "a long-term perspective" to buy stocks, and he vowed that the nation's financial mess "is going to get cleaned up."
Speaking to reporters after an Oval Office meeting with visiting British Prime Minister Gordon Brown, Obama said he has no doubt that his plan to rescue the U.S. economy will work. Among the topics he discussed with Brown, he said, were efforts to coordinate economic stimulus plans with other members of the Group of 20, an organization of major world economies that is holding a summit meeting in London next month.
On the domestic front, "I'm absolutely confident that credit's going to be flowing again, that businesses are going to start seeing opportunities for investment, they're going to start hiring again, people are going to be put back to work," Obama said in response to a question. "What I'm looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. You know, it bobs up and down day to day. And if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong."
The U.S. banking system "has been dealt a heavy blow," and a lot of losses "are working their way through the system," Obama said, adding that "it's not surprising that the market is hurting as a consequence."
He continued, "On the other hand, what you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. I think that consumer confidence, as they see the American Recovery and Reinvestment Act taking root -- businesses are starting to see opportunities for investment and potential hiring. We are going to start creating jobs again."
Obama predicted that government actions "are going to slowly build confidence, but it's not going to happen overnight." He urged Americans "to just recognize that we dug a very deep hole for ourselves. There were a lot of bad decisions that were made. We are cleaning up that mess. It's going to be sort of full of fits and starts, in terms of getting the mess cleaned up; but it's going to get cleaned up."
"And we are going to recover," Obama said. "And we are going to emerge more prosperous, more unified and, I think, more protected from systemic risk, having learned these lessons, than we were before."
Pressed later at a White House news briefing on whether Obama had essentially issued a "buy call" to help boost the stock market, spokesman Robert Gibbs dismissed the notion. Obama has often "talked about the fact that brighter days for our economy are ahead, if we take important steps and make important decisions now, about addressing many of the problems and challenges that we face." He said Obama has also said "that it's not his job to comment on or react to what the market does, up and down, on any given day, but instead to look at the longer term, at the longer horizon, at what can be done in this country to meet those challenges."
On Capitol Hill, meanwhile, Federal Reserve Chairman Ben S. Bernanke said the government needs to continue moving aggressively to combat the recession and financial crisis, even as it takes steps to rein in the budget deficit in the longer term. Testifying before the Senate Budget Committee, Bernanke said more money might be needed to stabilize the financial system.
"Although progress has been made on the financial front since last fall, more needs to be done," Bernanke said. "Whether further funds will be needed depends on the results of the current supervisory assessment of banks, the evolution of the economy and other factors. The administration has included a placeholder in its budget for more funding for financial stabilization, should it be necessary."
With that and fiscal stimulus spending, the government debt will likely approach 60 percent of gross domestic product, up from 40 percent before the financial crisis and the highest since the years after World War II.
Bernanke said that debt ratio makes it all the more important to contain deficits in the future to maintain credibility among the investors worldwide who buy U.S. government debt. But he gave a strong endorsement to continued -- and expensive -- efforts to deal with the crisis in the near term.
"We are better off moving aggressively today to solve our economic problems," Bernanke said. "The alternative could be a prolonged episode of economic stagnation that would not only contribute to further deterioration in the fiscal situation, but would also imply lower output, employment and incomes for an extended period."
But, he added, "maintaining the confidence of the financial markets requires that we begin planning now for the restoration of fiscal balance." He said the government will need to withdraw the temporary parts of the fiscal stimulus as the economy recovers, and spending on stabilizing the financial system must "wind down."
Bernanke, as is his practice, neither endorsed nor opposed many specific spending recommendations contained in the proposed budget released by the Obama administration last week. On such issues as energy, health care, education and tax policy, he said only that they are "complex policy issues in which the specific design of each program is as important as the budgetary amount allocated to it" and that Congress "will have considerable work in evaluating how to proceed."