By Scott Wilson
Washington Post Staff Writer
Monday, March 9, 2009
Republican congressional leaders yesterday called President Obama's budget proposal wasteful and his plan to rescue the nation's banks unrealistic, urging the administration to "make hard choices" and allow some major financial institutions to fail.
Obama administration officials, in turn, said that fixing the dismal economy would take time. They urged patience as the administration takes up health-care reform, reviews an inefficient government procurement process, and awaits the effects of the new public spending programs and tax cuts laid out in the $787 billion stimulus package recently signed into law.
As Congress prepares to consider a $3.6 trillion spending plan, the contours of the debate between Republican leaders and the administration appeared in sharp focus on the Sunday morning talks shows.
Over the past week, Obama has emphasized that he inherited the country's dire financial condition from the Bush administration.
Those reminders, echoed yesterday by his political proxies, have grown more pointed and frequent as the stock market continues to decline, job losses mount and criticism of his plans to cure the financial malaise rises.
Last week, the Labor Department reported that the economy shed 651,000 jobs in February and that the unemployment rate had climbed to its highest level -- 8.1 percent -- since 1983.
"Well, I think, fundamentally, the economy is weak," said Peter Orszag, Obama's budget director, said on CBS's "Face the Nation." He added: "Job losses began in January of 2008. The stock market started declining October 2007. This has been, you know, eight years in the making, and again, it's going to take some time to work our way out of it."
Sen. Evan Bayh (D-Ind.), appearing on ABC's "This Week," said, "The depth of domestic problems was worse than expected. The global nature of the recession, with Europe and China now struggling, was worse than we expected."
"But," Bayh said, "let's give this a little time."
Unhappy over the size and shape of the stimulus package, Republican leaders have turned their attention to the administration's expensive bank rescue plan, which many have criticized as too vague on how it would account for the bad assets burdening many financial institutions.
In recent months, the government has given direct aid to and taken large stakes in major financial institutions, with little evidence that the system is improving.
Several Republican senators warned that the Obama administration, by trying to keep alive banks with potentially untenable balance sheets, is following the path Japan took in the 1990s that many say prolonged its debilitating recession.
"I think that they've got to close some big banks," Sen. Richard C. Shelby (Ala.), the ranking Republican on the Senate banking committee, said on ABC.
"I don't want to nationalize them. I think we need to close them," he added. "If they're dead, they ought to be buried. We bury the small banks; we've got to bury some big ones and send a strong message to the market."
On "Fox News Sunday," Sen. John McCain (R-Ariz.) agreed.
"I don't think they made the hard decision, and that is to let these banks fail, to let General Motors go into bankruptcy and reemerge and reorganize with new contracts with labor and others," McCain said. "I don't think they've made the tough decisions. Some of these banks have to fail."
McCain also accused Obama of reneging on his pledge to reform the budget process, an issue in their presidential contest last year. The senator challenged Obama to veto a stopgap spending bill that contains about 8,000 earmarks, which are projects requested by individual lawmakers, usually for their states or districts.
Administration officials have argued that the earmarks, which McCain estimated add up to $8 billion, have been carried over from last year's budget process. On CNN's "State of the Union," Orszag said, "This is like your relief pitcher coming in into the ninth inning and wanting to redo the whole game."
"It is not last year's business," McCain said on Fox. "It's money that's going to be spent as soon as the president signs the bill. And he shouldn't sign it. He should veto it and send it right back."