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Economic Policy Is Working, Obama Says

President Obama, with Veterans Administration Secretary Eric K. Shinseki and Marine Sgt. James L. Miller, discusses the new G.I. Bill.
President Obama, with Veterans Administration Secretary Eric K. Shinseki and Marine Sgt. James L. Miller, discusses the new G.I. Bill. (By Gerald Martineau -- The Washington Post)
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By Scott Wilson and Michael A. Fletcher
Washington Post Staff Writers
Tuesday, August 4, 2009

In public appearances this week, President Obama will attempt to regain the initiative on the economy after what one senior administration official called several "rocky" weeks of declining support for the president and his major policy efforts.

He and his Cabinet advisers will fan out across several swing states to declare that the recovery has moved from the rescue stage to rebuilding, even though unemployment continues to increase and his advisers have been making contradictory statements about whether the administration may need to consider a tax increase for middle-class Americans.

Obama's insistence that the first phase of the recovery is over amounts to a strong defense of his intervention in the private-sector economy -- and of the administration's overall competency -- as lawmakers head into their August recess with the fate of health-care and energy reform still undetermined. But many Republicans and some Democrats say the administration may be misreading the pace of the turnaround and, in effect, celebrating too soon.

"Is this what economists call an inflection point? Probably," said William A. Galston, a senior fellow at the Brookings Institution who served as a domestic policy adviser in the Clinton White House. "To what extent has administration policy contributed to this? I would say substantially in the case of rescue, but not much, if it all, in slowing the rate of decline."

Galston warned that "the administration is sailing into some pretty stiff headwinds," citing the still-sluggish credit markets and, more important, the fact that "households have experienced a shock, even more to their wealth than to their income, that will take some time to get over."

Only a few weeks ago, Vice President Biden acknowledged that the administration had "misread" the depth of the recession upon taking office. Quarterly gross domestic product numbers have since been revised to show a more severe economic slide than was known at the time, but an administration that prefers playing offense has been forced to defend the effectiveness of its $787 billion stimulus measure in the face of rising unemployment.

But on Sunday even Sen. John McCain (R-Ariz.), Obama's general-election rival, conceded on CNN that the legislation has brought "short-term improvement in the economy." The most recent GDP figure showed the economy contracting at 1 percent over the most recent quarter, better than most forecasters anticipated.

"The GDP numbers validated our strategy," said Rahm Emanuel, Obama's chief of staff, sharpening the point made by the administration's top economic policy advisers on weekend talk shows. "If you think about it, the first six months were spent rescuing the economy. Now the president is laying the groundwork for rebuilding the economy."

Obama began making that case Monday when he told an audience of student veterans in Virginia that the tuition aid contained in the new G.I. Bill is "not simply a debt that we are repaying to the remarkable men and women who have served -- it is an investment in our own country."

On Wednesday, the president will travel to Elkhart, Ind., for a repeat visit to the nation's RV manufacturing capital, which he described in his weekly radio address as "hard-hit not only by the economic crisis of recent months, but by the broader economic changes of recent decades."

Emanuel said Obama will highlight the billions of dollars in stimulus grants that will go toward battery cell research for the next generation of electric cars, a sector of the economy he has highlighted for its potential to create jobs.

The stimulus measure contains $21.5 billion for basic research -- the largest one-time spending ever in that area -- and $60 billion for such projects as extending broadband's reach, computerizing health records and creating a smart grid, among other programs the administration has deemed important to developing a new economy.


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