Obama casts crisis as opportunity for reform

Bloomberg

U.S. President Barack Obama framed the economic crisis as an opportunity to solve some of the nation’s most intractable issues and signaled that more taxpayer money would be needed to end the credit crunch.

In his first address to a joint session of Congress, Obama said Tuesday night the staggering economy has left "our confidence shaken" and promised "we will rebuild, we will recover, and the United States of America will emerge stronger than before."

He tried to strike a balance between describing the symptoms of the U.S.’s financial woes and prescribing a cure. That prescription went well beyond the crisis that has forced banks such as Citigroup and Bank of America to seek billions of dollars in federal aid, to include the expansion of the government’s role in health care, energy and education.

The president, a Democrat, challenged Republicans in Congress to join him in a dramatic change of course. "The cost of action will be great," he said. "I can assure you that the cost of inaction will be far greater."

Republicans rejected the call to join forces. In the party’s official reply following Obama’s speech, Louisiana Governor Bobby Jindal called Obama’s economic- stimulus plan "irresponsible" and said it will increase taxes and "saddle future generations with debt."

Biden to oversee spending

Obama, 47, anticipated such opposition, saying, "I understand your skepticism." He promised to appoint Vice President Joe Biden to oversee how federal money is spent.

Obama, who has been in office little more than a month, is confronting a deepening economic crisis, with reports showing consumer confidence collapsed this month and home values plunged in December. Fed Chairman Bernanke told the Senate Banking Committee Tuesday the U.S. is in a "severe" contraction and the recession may last into 2010.

While Obama pressed for immediate action on the crisis, he also called for sweeping initiatives on energy, health care and education. "History reminds us that, at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas," he said.

He called for a "market-based" cap on carbon emissions, which he said would lower U.S. production of greenhouse gases. He pledged to spend $15 billion a year to develop wind and solar power, biofuels, clean coal technology, and research into fuel-efficient vehicles.

The country also can’t afford to delay revamping the health-care system, he said. "Health-care reform cannot wait, it must not wait, and it will not wait another year," Obama said. The White House will hold a summit on the issue next week.

On education, the president set a goal for the U.S. to have the world’s highest proportion of college graduates by 2020. "In a global economy, where the most valuable skill you can sell is your knowledge, a good education is no longer a pathway to opportunity - it is a prerequisite," he said.

Obama vowed to use ’the full force of the federal government’ to shore up the banking system and suggested that fixing the crisis will cost more than the $700 billion already committed.

The announcement may provide a boost to the nation’s lenders, whose share prices have fluctuated over speculation that they may need to be nationalized to ensure their survival.

"We now know that more money’s coming," said Brian Gardner, a policy analyst at Keefe Bruyette & Woods.

Clogged credit markets must be opened or "recovery will be choked off before it even begins," said Obama. The crisis stems from what he described as a short-sighted attitude that infected Main Street, Wall Street and Washington. "We have lived through an era where, too often, short-term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election," he said. In a nod to the populist uproar over Wall Street bonuses and lavish office decorating with taxpayer funds, Obama said, "I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage. That’s what this is about. It’s not about helping banks - it’s about helping people."