PROSE, NOT POETRY…. The one thing I always like about President Obama’s speeches is that he just doesn’t talk down to his audience. He seems intent on treating Americans like grown-ups, and today’s speech on the economy was no different.
Obama warned his Georgetown University audience early on that his speech would be “prose, not poetry.” It wasn’t filled with obvious applause lines, and the soaring rhetoric that many have come to expect from him wasn’t there.
But it wasn’t that kind of speech. Instead, the president offered something along the lines of a fireside chat, which happened to be delivered from a podium in a crowded room: “Today, I want to step back for a moment and explain our strategy as clearly as I can. I want to talk about what we’ve done, why we’ve done it, and what we have left to do. I want to update you on the progress we’ve made, and be honest about the pitfalls that may lie ahead. And most of all, 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.”
Did Obama break new ground? Not much. But we got a very clear sense of the president’s thoughts about where we’ve been, where we are, and where we’re headed. Alex Koppelman described it as “one of the best explanations of the economic crisis and his administration’s response that the president has given so far,” which sounds right to me.
I won’t try to summarize the whole thing, but I was struck by the ways in which the president wants Americans to understand how terribly wrong Republicans are.
“[E]conomists on both the left and right agree that the last thing a government should do in the middle of a recession is to cut back on spending. You see, when this recession began, many families sat around their kitchen table and tried to figure out where they could cut back. So do many businesses. That is a completely responsible and understandable reaction. But if every family in America cuts back, then no one is spending any money, which means there are more layoffs, and the economy gets even worse. That’s why the government has to step in and temporarily boost spending in order to stimulate demand. And that’s exactly what we’re doing right now.
“Second of all, I absolutely agree that our long-term deficit is a major problem that we have to fix. But the fact is that this recovery plan represents only a tiny fraction of that long-term deficit. As I will discuss in a moment, the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs — not to stand idly by as the economy goes into free fall.”
He also tackled the issue of bailouts, most notably of the banks and AIG.
“Of course, there are some who argue that the government should stand back and simply let these banks fail — especially since in many cases it was their bad decisions that helped create the crisis in the first place. But whether we like it or not, history has repeatedly shown that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months — years of low growth, low job creation, and low investment that cost those nations far more than a course of bold, upfront action. And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks — “where’s our bailout?,” they ask — the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.
“On the other hand, there have been some who don’t dispute that we need to shore up the banking system, but suggest that we have been too timid in how we go about it. They say that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks, and that our failure to do so is yet another example of Washington coddling Wall Street. So let me be clear — the reason we have not taken this step has nothing to do with any ideological or political judgment we’ve made about government involvement in banks, and it’s certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess.
“Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: first do no harm. So rest assured — we will do whatever is necessary to get credit flowing again, but we will do so in ways that minimize risks to taxpayers and to the broader economy. To that end, in addition to the program to provide capital to the banks, we have launched a plan that will pair government resources with private investment in order to clear away the old loans and securities — the so-called toxic assets — that are also preventing our banks from lending money.
“Now, what we’ve also learned during this crisis is that our banks aren’t the only institutions affected by these toxic assets that are clogging the financial system. A.I.G., for example, is not a bank. And yet because it chose to insure trillions of dollars worth of risky assets, its failure could threaten the entire financial system and freeze lending even further. This is why, as frustrating as it is — and I promise you, nobody is more frustrated than me — we’ve had to provide support for A.I.G. It’s also why we need new legal authority so that we have the power to intervene in such financial institutions, just like a bankruptcy court does with businesses that hit hard times, so that we can restructure these businesses in an orderly way that does not induce panic — and can restructure inappropriate bonus contracts without creating a perception that government can just change compensation rules on a whim.”
Obama also walked a careful line, pointing to small reasons for optimism, while warning of difficult times ahead.
“Because of our recovery plan, schools and police departments have cancelled planned layoffs. Clean energy companies and construction companies are re-hiring workers to build everything from energy efficient windows to new roads and highways. Our housing plan has helped lead to a spike in the number of homeowners who are taking advantage of historically-low mortgage rates by refinancing, which is like putting a $2,000 tax cut in your in pocket. Our program to support the market for auto loans and student loans has started to unfreeze this market and securitize more of this lending in the last few weeks. And small businesses are seeing a jump in loan activity for the first time in months.
“This is all welcome and encouraging news, but it does not mean that hard times are over. 2009 will continue to be a difficult year for America’s economy. The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends. The market will continue to rise and fall. Credit is still not flowing nearly as easily as it should. The process for restructuring AIG and the auto companies will involve difficult and sometimes unpopular choices. All of this means that there is much more work to be done. And all of this 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.
“But even as we continue to clear away the wreckage and address the immediate crisis, it is my firm belief that our next task is to make sure such a crisis never happens again. Even as we clean up balance sheets and get credit flowing; even as people start spending and business start hiring — we have to realize that we cannot go back to the bubble and bust economy that led us to this point.
“It is simply not sustainable to have a 21st century financial system that is governed by 20th century rules and regulations that allowed the recklessness of a few to threaten the entire economy. It is not sustainable to have an economy where in one year, 40% of our corporate profits came from a financial sector that was based too much on inflated home prices, maxed out credit cards, overleveraged banks and overvalued assets; or an economy where the incomes of the top 1% have skyrocketed while the typical working household has seen their income decline by nearly $2,000.
“For even as too many were chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we remain addicted to foreign oil; the growing debt that we’re passing on to our children. And even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century.”