Economic Messengers Perform on a Tightrope

By Neil Irwin
Washington Post Staff Writer
Monday, August 3, 2009

Amid signs that the economy is stabilizing, President Obama and his aides are moving to take credit for the gains.

In appearances on weekend talk shows, Obama's advisers gave a first look at how the administration seeks to navigate a tricky period for communicating about the economy. They wish to advertise the signs of economic improvement while not appearing out of touch with the millions of Americans who remain jobless.

The administration will keep using government policy to boost the economy in the short run, the advisers indicated, but will contain the deficit in the longer run, even if it means higher taxes. Treasury Secretary Timothy F. Geithner refused to rule out that possibility, saying the administration will "do what it takes" to bring the deficit down.

To reconcile the apparent tensions, they simultaneously tried to remind Americans of how bad conditions were at the beginning of the year, claim that the economic stimulus package they championed is part of the reason things are looking better now and acknowledge that the job market is likely to get worse before it gets better.

"Six months ago, the economy was in a nose dive, people were talking about the possibility of another depression, the statistics all suggested a vertical decline," said Lawrence H. Summers, the top White House economic adviser, on "Meet the Press." "None of that is the situation right now," he said.

As Congress goes on recess and the debate over a health-care overhaul stalls, attention is shifting back to the state of the economy and the prognosis for a sustained recovery -- along with how to deal with the budget deficits the nation could be left with in the years ahead.

Both Summers and Geithner argued that the Obama administration will contain those deficits. Geithner, under repeated questioning from "This Week" host George Stephanopoulos, refused to rule out tax increases to close the long-term budget gap.

"We're going to have to do what it takes" to contain the deficit, Geithner said.

Friday's better-than-expected report on gross domestic product offered strong evidence that the economic contraction that began at the end of 2007 could now be ending. Companies have cut back so aggressively that they will need to increase production levels just to keep up with demand for their goods and services.

That, forecasters say, will lead to an increase in GDP, the broadest measure of economic output, over the coming months. Sectors of the economy that have been in deep decline, including housing and autos, now appear to be leveling off.

Sunday, for example, Ford officials told reporters that they sold more vehicles in July than they did a year earlier -- the first monthly increase for the company in two years. Ford attributed the gain in part to the government's "Cash for Clunkers" program to encourage people to buy new cars.

Even as the nation starts producing more goods and services, though, joblessness is expected to continue rising -- both because the expansion is expected to be weak initially and because businesses are behaving with extreme caution, making them reluctant to hire even if they do see rising demand for their products.

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