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Obama says changes are needed to help recovery take hold

The president tries to keep the nation focused on a still-troubled economy as he pushes an ambitious plan to to revamp healthcare, energy, education and financial regulation.

April 15, 2009|Jim Puzzanghera and Michael Oneal

WASHINGTON — With signs that the worst of the recession may have passed, President Obama is trying to keep the nation focused on a still-troubled economy and regain momentum in Congress for his plan to revamp healthcare, energy, education and financial regulation -- thorny issues that have long defied solution.

"By no means are we out of the woods just yet," Obama said in what amounted to an economic State of the Union address Tuesday.

The worst economic crisis since the Great Depression grew out of "a perfect storm of irresponsibility and poor decision-making," he said, and "we cannot rebuild this economy on the same pile of sand."

Already facing push-back in Congress on his overall economic strategy, Obama was effectively laying down a marker: He will fight for his ambitious agenda and argue that his opponents are putting long-term recovery at risk.

Congress is out on holiday recess until next week, so there was little immediate reaction to Obama's warning shot for Capitol Hill. But Senate Budget Committee Chairman Kent Conrad (D-N.D.) offered a foretaste of just how uncertain many lawmakers -- even Obama's allies -- are about accomplishing all that the president seeks.

"It is hard to do everything that needs to be done," said Conrad, whose committee has struggled to draft a budget blueprint that at least pays homage to Obama's views. "You do have to prioritize."

Obama's 45-minute speech, delivered before an audience at Georgetown University, came at a crucial moment for the White House.

Although most experts see more job losses and hardship ahead, and a long road to recovery even after the economy begins to mend, recent signs that the crisis could be bottoming out threaten to relieve the pressure on Congress to act on Obama's agenda.

Powerful interest groups, for example, are prepared to fight his plan to tighten government oversight of the financial system, as well as challenge his ideas for restructuring the economy through action on healthcare, energy and student-loan policy.

They can point to such positive signs as Tuesday's comments by personal computer chip maker Intel Corp.'s chief executive, Paul Otellini. "We are seeing signs that the bottom of the PC market segment has been reached. I believe the worst is now behind us," he told analysts in a conference call.

Still, a Commerce Department report Tuesday showed that retail sales in March dropped a sharp 1.1%, demonstrating that the economy continues to be in critical condition.

If the crisis atmosphere abates, White House strategists fear, Washington could drift back toward the partisan stalemate that has prevented action on these key issues in the past. By linking them to the economic crisis and warning that prosperity is not just around the corner, Obama hopes to keep the pressure on.

"The economic crisis opens the door for the president to secure regulatory reforms that otherwise would be impossible politically to achieve," said Jaret Seiberg, a financial policy analyst with the Washington Research Group.

"I think the window is closing to make significant progress on these initiatives, because once we start to recover, there's going to be less momentum to get it done quickly and the special interests are going to have more power to modify the plans," he said.

Against that backdrop, Obama sought to blunt the criticism and maintain a sense of urgency about attacking the recession. While President Franklin D. Roosevelt tried to soothe anxiety during the Great Depression by telling the nation "the only thing we have to fear is fear itself," Obama tried to keep some fear alive.

Addressing his critics head-on, the president defended his economic strategy as a prudent, middle-of-the-road course that focused on helping average Americans. But he acknowledged that continual bailouts of banks and financial institutions, such as insurance giant American International Group, appeared to be rewarding the very people who helped cause the crisis.

"One of my most frequent questions in the letters that I get from constituents is 'Where's my bailout?,' and I understand the sentiment," Obama said. "It makes sense intuitively, and morally it makes sense, but the truth is that a dollar of capital in a bank can actually result in $8 or $10 of loans to families and businesses.

"So that's a multiplier effect that can ultimately lead to a faster pace of economic growth. That's why we have to fix the banks."

Sounding like the former college professor he is, Obama used much of the speech to explain his view of the causes of the crisis. But throughout his version of Recession 101, Obama continued to point to the vital work needed to make a recovery take hold.

"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," Obama said.

As if to underscore his point, the Dow Jones index of 30 blue-chip stocks fell 137.63 points to 7,920.18.

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