The President's economic speech at Georgetown University on April 16: See the text here. And an introductory blog entry by Gerald F Seib at the Wall Street Journal, here.
Its a good speech designed to define the plan's separate pieces and then how they all fit together to create a cohesive overall plan that will slowly but surely change direction in the country. I only hope nobody puts a monkey wrench in the plan because it seems like it all has to fit together in order to work. With any part of it gutted by whiny Republicans in congress, or the progressive left trying to get more than is practical (even though I support them!) I would worry about its success.
Your best bet is to read the full text or watch the video, but if you want...following is my summary of the speech. I enjoyed reading it slowly and taking notes because it helps stick in my head that way. Its a pretty darn good speech I'd say.
Obama lays out his vision...
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 - a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, or reckless speculation, or fleeting profits, 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 technologies and innovation and discoveries that will shap the 21st century. That's the America I see. ... That is the future that I know that we can have.
Obama lays out how we got here...
lenders and investment banks wanted to make quick profits, people believed they could buy houses their incomes did not support, credit agencies gave a rubber stamp approval to securities they didn't understand and couldn't quantify. Investors and banks passed off risks to others and believed the housing market would never bust. Even companies that were considered conservative, safe, and secure - AIG, Fannie Mae, Freddie Mac - wanted in on the action. Little, if any, accountability from Washington or Wall Street. The housing bubble burst - oh! home prices really DO go down.
Greed gave way to fear. Investors pulled their money out of the market. Large financial institutions that didn't have enough money on hand to pay off all their obligations collapsed. Other banks held on tight to their money and simply stopped lending.
Now, this is when the crisis spread from Wall Street to Main Street. After all, the ability to get a loan is how you finance the purchase of everything from a home to a car to a...college education. Its how stores stock their shelves, and farms buy equipment, and businesses make payroll. So when banks stopped lending money, businesses started laying off workers. When laid-off workers had less money to spend, businesses were forced to lay off even more workers. When people couldn't get a car loan, a bad situation at the auto companies became even worse. When people couldn't get home loans, the crisis in the housing market only deepened. Because the infected securities were being traded worldwide and other nations also had weak regulations, this recession soon became global. And when other nations can't afford to buy goods, it slows our economy even further.
So this is the situation, the downard spiral that we confronted on the day that we took office. So our most urgent task has been to clear away the wreckage, repair the immediate damage to the economy, and do everything we can to prevent a larger collapse. And since the problems we face are all working off each other to feed a vicious economic downturn, we've had no choice but to attack all our fronts of our economic crisis simultaneously.
Obama lays out the steps he's taking...
Step 1 - fight a severe shorgage of demand in the economy by lowering interest rates (Federal Reserve), pass the American Reinvestment and Recovery Act which includes a tax cut, extend unemployment benefits and continued health care for Americans who have lost their job through no fault of their own.
Argument against Step 1 - this is irresponsible spending and the federal government should be cutting instead of increasing spending right now. What about our long-term deficit?
Counter argument for Step 1 - if everybody - every business and family in America - curtails spending and cuts back all at once, "then no one is spending any money, which means there are no customers, which means there are more layoffs, which means the economy gets even worse." The recovery plan represents a tiny fraction of the long-term deficit. "As I'll discuss in a moment, the key to dealing with our long-term deficit and our national debit is to get a handle on out-of-control health care costs - not to stand idly by as the economy goes into free fall."
Step 2 - "heal our financial system so that crdit is once again flowing to the businesses and families who rely on it." Continue TARP. "We must provide banks with the capital and the confidence necessary to start lending again." Stress Tests on banks to determine how much additional capital will be needed to support lending at our largest banks. When we give money to banks "we will hold accountable those who are responsible, we'll force the necessary adjustments, we'll provide the support to clean up those bank balance sheets...". Pair government resources with private investment in order to clear away the old loans and securities that are also preventing banks from lending money. Increase guarantees for small business loans, unlock the market for auto loans and student loans. Stabilize the housing market with a foreclosure/refinance plan. Work with the auto industry.
Argument(s) against step 2 - a) the government should let the banks fail since it was their bad decisions that helped create the crisis in the first place. b) Give the money directly to the people and the businesses instead of the banks. c) nationalize the banks already! Do like the FDIC does with smaller banks. Why aren't you tougher on banks?
Counter argument(s) for Step 2 - a) history shows us that if you don't take early and aggressive action to get credit flowing again, the crisis will last years and years instead of months and months. b) "a dollar of capital in a bank can actually result in $8 or $10 of loans to families and business. So, that's a multiplier effect that can ultimately lead to a faster pace of economic growth." c) "we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because its more likely to undermine thatn create confidence."
A note from me: Its important to quickly get credit flowing again IF you want to live in an economy based almost exclusively on credit. It seems to me we might want some businesses and purchases to be credit based, but our lifestyle should not be built on it.
Step 3 - Coordinate a global response to the global recession. Go to the G20 summit in London. All countries agreed to toughen regulatory reforms, triple the lending capacity of the Internation Monetary Fund, pledged to avoid trade barriers and protectionsism, and plan to meet again.
So that's where we've been, that's what we've done in the last three mnths. All of these actions - the Recovery Act, the bank capitalization program, the housing plan, the strengthening of the non-bank credit market, the auto plan, and our work at the G20 - all have been necessary pieces of the recovery puzzle. They've been designed to increase aggregate demand to get credit flowing again to families and businesses and to help families and bsinesses ride out the storm. And taken together, these actions are starting to generate signs of economic progress.
...
2009 will continue to be a difficult year for American's economy, and obviously, most difficult for those who've lost their jobs. The severity of this recession will cause more job loss, more foreclosres, and more pain before it ends. The market will continue to rise and fall. Credit is still not lowing nearly as easily as it should. The process for restructuring AIG and the auto companies will involve difficult and sometimes unpopular choices; we are not finished yet on that front. And all of this means that there's much more work to be done. But all of this also means that you can continue to expect an unrelenting, unyielding, day-by-day effort from this administration to fight for economic recovery on all fronts.
Obama lays out his plan for the future...
Make sure this type of crisis never happens again. Rebuild our economic house on a solid foundation.
a) work with congress to create new rules for Wall Street that reward drive an innovation, not reckless risk-taking, create a regulatory framework for banks, lenders, etc.
b) investment in education that will make our workforce more skilled and competitive, expand early childhood education, innovative education programs help schools meeting high standards and close achievement gaps, review teacher compensation, every American should commit to at least one year or more of higher education or career training, tax credits for college education, develop more scientists and engineers.
c) invest in renewable energy and technology to create new jobs and new industries, the Recovery Act has some investment in renewable energy, market-based cap on carbon pollution.
d) investment in health care to cut costs for families and business, Recovery Act has investment in electronic health records, invest in preventative care, in the current budget just passed there a commitment to reform health care - work with Congress to make that happen.
e) restore fiscal discipline in the federal budget - procurement reform to greatly reduce no-bid contracts, waste and cost overruns in the defense budget (announced by Secretary Gates), end education programs that don't work, root out waste and fraud and abuse in Medicare, go through federal budget line by line.
These are the 'five pillars' "...that will grow our economy and make this new century another American century."
I know there is a criticism out there that my administration has somehow been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children's future.
Well let me make three points.
First, as I said earlier, the worst thing that we could do in a recession this severe is to try to cut government spending at the same time as families and businesses around the world are cutting back on their spending. So as serious as our deficit and debt problems are - and they are very serious - major efforts to deal with them have to focus on the medium and long-term budget picture.
Second, in tackling the deficit issue, we simply cannot sacrifice the long-term investments that we so desperately need to generate long-term prosperity. Just as a cash-strapped family may cut back on luxuries but will insist on spending money to get their children through college, so we as a country have to make current choices with an eye on the future. If we don't invest now in renewable energy or a skilled workforce or a more affordable health care system, this economy simply won't grow at the pace it needs to in two or five or ten years down the road. If we don't lay this new foundation, it won't be long before we are right back where we are today. And I can assure you that chronically slow growth will not help our long-term budget situation.
Third, the problem with our deficit and debt is not new. It has been building dramatically over the past eight years, largely because big tax cuts combined with increased spending on two wars and the increased costs of government health care programs. This structural gap in our budget, between the amount of money coming in and the amount going out, will only get worse as Baby Boomers age, and will in fact lead us down an unsustainable path. But let's not kid ourselves and suggest that we can do it by trimming a few earmarks or cutting the budget for the National Endowment for the Arts. Along with defense and interest on the national debt, the biggest costs in our budget are entitlement programs like Medicare, Medicaid, and Social Security that get more and more expensive every year. So if we want to get serious about fiscal discipline - and I do - then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun - but we will also have to get serious about entitlement reform.
Nothing will be more important to this goal than passing health care reform that brings down costs across the system, including in Medicare and Medicaid. Make no mistake: health care reform is entitlement reform. That's not just my opinion - that was the conclusion of a wide range of participants at the Fiscal Responsibility Summit we held at the White House in February, and that's one of the reasons why I firmly believe we need to get health care reform done this year.
And the end of the speech is really quite good as well...
All of these efforts will require tough choices and compromises. But the difficulties can't serve as an excuse for inaction. Not anymore.
This brings up one final point I'd like to make today. I've talked a lot about the fundamental weakness in our economy that led us to this day of reckoning. But we also arrived here because of a fundamental weakness in our political system.
For too long, too many in Washington put off hard decisions for some other time on some other day. There's been a tendency to score political points instead of rolling up sleeves to solve real problems. There is also an impatience that characterizes this town - an attention span that has only grown shorter with the twenty-four hour news cycle, and insists on instant gratification in the form of immediate results or higher poll numbers. When a crisis hits, there's all too often a lurch from shock to trance, with everyone responding to the tempest of the moment until the furor has died away and the media coverage has moved on, instead of confronting the major challenges that will shape our future in a sustained and focused way.
This can't be one of those times. The challenges are too great. The stakes are too high. I know how difficult it is for Members of Congress in both parties to grapple with some of the big decisions we face right now. It's more than most congresses and most presidents have to deal with in a lifetime.
But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility - to ourselves, to the men and women who sent us here, and to the many generations whose lives will be affected for good or for ill because of what we do here.
There is no doubt that times are still tough. 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. It's an America teeming with new industry and commerce; humming with new energy and discoveries that light the world once more. A place where anyone from anywhere with a good idea or the will to work can live the dream they've heard so much about.
It is that house upon the rock. Proud, sturdy, and unwavering in the face of the greatest storm. We will not finish it in one year or even many, 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. Thank you, God Bless you, and may God Bless the United States of America.
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