President Obama's Speech on the Economy

Click here for President Obama's remarks:

David Stout and Peter Baker wrote for the New York Times{ "President Obama said on Tuesday that the battered economy was showing signs of recovery, but he warned Americans that more pain lies ahead and urged them to help build a foundation for a new, 21st century prosperity.

"Speaking just after a disappointing report on March retail sales made it clear that a sustained recovery is not yet at hand, the president delivered a speech that was part pep talk and part rebuke, not only for the once high-rolling members of the financial world but for politicians who he said had deferred tough decisions for too long.

“I want every American to know that each action we take and each policy we pursue is driven by a larger vision of America’s future,” Mr. Obama said in remarks at Georgetown University.

"The White House had previewed the event as a “major speech” on the economy, but Mr. Obama did not break new ground. He did, however, use the occasion to reaffirm his determination to do something about the rising cost of health care and, later, to shore up Social Security.

"The president seemed to guard against being tagged as a “liberal.” For instance, he defended his administration’s decision not to take over failing banks: “Governments should practice the same principle as doctors: first, do no harm.” And at another point, he invoked religious imagery.

"The president envisioned “a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations and discoveries that will shape the 21st century.”

“That is the future I see. That is the future I know we can have.”

"But the near future will bring “more job loss, more foreclosures and more pain before it ends,” Mr. Obama said. Underscoring his point was a Commerce Department report showing that consumer spending on a wide array of goods declined in March, reflecting a general spirit of uncertainty as well as continuing job losses.

"The president said, as he has repeatedly, that the recently enacted stimulus plan, the efforts to strengthen the banking system and attempts to rescue the flagging American auto industry have all borne fruit, demonstrated in part by an increase in home-mortgage refinancing and more lending by small businesses.

“This is all welcome and encouraging news, but it does not mean that hard times are over,” Mr. Obama said, warning that 2009 will be a difficult year, and that no one should expect a return to full prosperity soon.

"As the president spoke, the Federal Reserve Chairman Ben S. Bernanke told an audience at Morehouse College in Atlanta that there were “tentative signs” that the decline in the economy was slowing.

"President Obama called on Americans to take the long view. “There is no doubt that times are still tough,” he said. “By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past.”

"Realizing that vision will require a new regulatory structure, one based on 21st century needs rather than an outdated financial buccaneer ethic, the president said. It will also require work on deep, complicated issues like health care and energy, he said.

"As Mr. Obama spoke inside Georgetown’s Gaston Hall, a small group of abortion opponents demonstrated outside against the presence at a Catholic university of a president who supports abortion rights. Using a bullhorn, the protesters could sometimes be heard faintly in the back of the hall during the president’s speech. (There have been similar protests at Notre Dame, where the president is to speak at commencement exercises on May 17.) Mr. Obama, alluding to a parable at the end of the Sermon on the Mount, said he saw a new America whose foundations are built not on sand but on rock, “proud, sturdy and unwavering in the face of the greatest storm.”

“We will not finish it in one year or even many,” he said, “but if we use this moment to lay that new foundation, if we come together and begin the hard work of rebuilding, if we persist and persevere against the disappointments and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live on in our time.”

Krugman Responds to Obama's Request for Ideas

Paul Krugman has written a response to Obama's request for ideas on: “how to spend money efficiently and effectively to jump-start the economy.” First, Krugman briefly explains that: "the “jump-start” metaphor is part of the problem. Then Krugman makes the suggestion that: "First, Mr. Obama should scrap his proposal for $150 billion in business tax cuts, which would do little to help the economy. Ideally he’d scrap the proposed $150 billion payroll tax cut as well, though I’m aware that it was a campaign promise." Then according to Krugman, the $150 billion saved "on ineffective tax cuts could be used to provide further relief to Americans in distress — enhanced unemployment benefits, expanded Medicaid and more. And why not get an early start on the insurance subsidies — probably running at $100 billion or more per year — that will be essential if we’re going to achieve universal health care?" In general terms, Krugman wants to see Obama create a much larger plan. Krugman enhances his suggestions by quoting that: "On Saturday, Christina Romer, the future head of the Council of Economic Advisers, and Jared Bernstein, who will be the vice president’s chief economist, released estimates of what the Obama economic plan would accomplish. Their report is reasonable and intellectually honest, which is a welcome change from the fuzzy math of the last eight years. But the report also makes it clear that the plan falls well short of what the economy needs." Krugman explains Romer's and Bernstein's assessments that: "the Obama plan would have its maximum impact in the fourth quarter of 2010. Without the plan, they project, the unemployment rate in that quarter would be a disastrous 8.8 percent. Yet even with the plan, unemployment would be 7 percent — roughly as high as it is now." The plan would loose its effectiveness after 2010, falling short of establishing a "full recovery" and positioning "the unemployment rate" at "a painful 6.3 percent in the last quarter of 2011." Krugman accepts the possibility that "things could turn out better than the report predicts. But they could also turn out worse. The report itself acknowledges that “some private forecasters anticipate unemployment rates as high as 11 percent in the absence of action.”" Krugman voices his agreement with Lawrence Summers who has said that: "In this crisis, doing too little poses a greater threat than doing too much.” Unfortunately, that principle isn’t reflected in the current plan." These observations prompt Krugman to ask: "So how can Mr. Obama do more?" Swiftly followed by Krugman's observation: "By including a lot more public investment in his plan — which will be possible if he takes a longer view." Krugman points out that: "The Romer-Bernstein report acknowledges that “a dollar of infrastructure spending is more effective in creating jobs than a dollar of tax cuts.”" It argues, however, that “there is a limit on how much government investment can be carried out efficiently in a short time frame.” Leading Krugman to ask: "But why does the time frame have to be short? As far as I can tell," Krugman notes; "Mr. Obama’s planners have focused on investment projects that will deliver their main jobs boost over the next two years. But since unemployment is likely to remain high well beyond that two-year window, the plan should also include longer-term investment projects. And bear in mind" Krugman interjects; "that even a project that delivers its main punch in, say, 2011 can provide significant economic support in earlier years." Krugman believes that even "If Mr. Obama drops the “jump-start” metaphor, if he accepts the reality that we need a multi-year program rather than a short burst of activity, he can create a lot more jobs through government investment, even in the near term." This observation leaves Krugman searching for an answer to his question: "Still, shouldn’t Mr. Obama wait for proof that a bigger, longer-term plan is needed?" Krugman is direct and answers: "No." Because according to Krugman's analysis: "Right now the investment portion of the Obama plan is limited by a shortage of “shovel ready” projects, projects ready to go on short notice. A lot more investment can be under way by late 2010 or 2011 if Mr. Obama gives the go-ahead now — but if he waits too long before deciding, that window of opportunity will be gone." Krugman makes it a point to write: "One more thing: even with the Obama plan, the Romer-Bernstein report predicts an average unemployment rate of 7.3 percent over the next three years. That’s a scary number, big enough to pose a real risk that the U.S. economy will get stuck in a Japan-type deflationary trap." Krugman concludes his short bit of "...advice to the Obama team" by briefly suggesting "to scrap the business tax cuts, and, more important, to deal with the threat of doing too little by doing more. And the way to do more is to stop talking about jump-starts and look more broadly at the possibilities for government investment." Obama said the other day that he would be willing to listen to critics; Paul Krugman included. So lets all hope Mr. Obama takes a moment to read and consider Krugman's column today. We might all benefit from Obama's curiosity.