Obama Team Touts Economic Plans

Lawrence Summers, President Obama's top economic adviser, said Friday that the crisis in the financial sector has led to an 'excess of fear' that must be broken to reverse the economic downturn. Video by AP
By Lori Montgomery
Washington Post Staff Writer
Saturday, March 14, 2009

President Obama yesterday acknowledged that a severe recession has brought "incredible pain and hardship" to millions of families, but said he is confident that his policies will revive the economy and help the nation avoid future calamities.

Though the jobless rate is rising, Obama urged patience while federal efforts to stabilize the financial system and boost economic activity take effect. He also offered a vigorous defense of his decision to pursue an ambitious social agenda in the midst of the crisis, saying he is laying the foundation for "a post-bubble economic growth model."

"The days when we are going to be able to grow this economy just on an overheated housing market or people spending -- maxing out on their credit cards -- those days are over," Obama told reporters after meeting with economic advisers at the White House. "What we need to do is go back to fundamentals. And that means driving our health care costs down. It means improving our education system so our children are prepared and we're innovating in science and technology. And it means that we're making this transition to the clean-energy economy."

Obama's remarks, tinged with optimism, came as the administration launched a broader campaign to build support for its initiatives and to combat what National Economic Council Director Lawrence H. Summers said yesterday was "an excess of fear" blocking the path to recovery. Over the past week, Obama and other top administration officials have fanned out across Washington to publicly discuss the economy, take questions and offer reassurance.

On Monday, Christina Romer, chairman of the president's Council of Economic Advisers, told an audience at the Brookings Institution that the current crisis, while severe, "pales in comparison" with the Great Depression. On Thursday, Obama told the Business Roundtable, an association of executives, that things "are not as bad as we think they are." And yesterday, as Obama met with his economic advisers, Summers told another Brookings crowd that he sees glimmers of hope amid the economic gloom.

"It is surely too early to gauge the broader economic impact of the president's program," Summers said. "But it is modestly encouraging that since it began to take shape, consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized."

The campaign continues tomorrow when Summers and Romer are scheduled to appear on the Sunday talk shows.

Republicans, meanwhile, noted that the administration is selling a sense of hope even as the jobless rate has spiked to 8.1 percent and economic advisers to House Speaker Nancy Pelosi (D-Calif.) have warned that another big stimulus package might be needed.

"Their newfound optimism is definitely a tactical shift," said Antonia Ferrier, a spokeswoman for House Minority Leader John A. Boehner (R-Ohio). "For the sake of American families and small businesses, we hope they are right."

Brookings scholar Alice Rivlin, a former vice chairman of the Federal Reserve and a budget director for President Bill Clinton, said the campaign appears to have two goals: First, to respond to the "flak" the administration is taking over its $3.6 trillion budget request. And second, to tamp down unrealistic expectations for a speedy recovery.

"The widespread economic view at the moment is that things are getting rapidly worse in the interaction between the credit crunch and the downward spiral in the economy and the downward spiral globally. It's not a pretty picture," Rivlin said. The Obama administration is "doing everything they can," she said. "But people should realize that this is a very serious situation and it won't turn around fast."

Summers hit that point repeatedly yesterday, saying that despite enactment of "the boldest economic program to promote recovery and expansion in two generations . . . no one can predict with precision when this crisis will be resolved." While the nation is being driven deeply into debt, Summers argued that Obama had no choice but to spend on recovery efforts.

Markets are usually self-correcting, Summers said, but the current crisis is of the sort that occurs "two or three times each century," when the markets are overwhelmed by "vicious cycles" and the "right economic metaphor becomes not a thermostat, but an avalanche."

That avalanche, Summers said, was provoked by an "excess of greed" on Wall Street that has quickly been transformed into "an excess of fear."

"What we need today is more optimism and more confidence," Summers said, extolling the bargains to be had in undervalued stocks and throughout the economy. He noted that the Dow Jones industrial average, adjusted for inflation, is at the same level as it was in 1966, "which may be regarded by some as the sale of the century."

Summers also defended Obama's decision to pursue expensive initiatives in health care, education and energy, arguing that "confidence today will be enhanced if we put measures in place that assure that the coming expansion will be more sustainable and fair in the distribution of benefits than its predecessor.

"It is tempting to suppose the focus of economic policy at a moment like this should be solely on economic recovery," he said. "We believe that would be setting our sights too low."

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