Obama suggests purchasing stocks, defends economic plan
Wednesday, March 4, 2009
WASHINGTON -- The stock market reminds Barack Obama of a political tracking poll. "You know, it bobs up and down from day to day," the president said Tuesday.
"And if you spend all your time worrying about that, you're probably going to get the long-term strategy wrong."
Most of the bobbing lately has been in one direction, relentlessly down. But Obama suggested that now is a good time for investors with "a long-term perspective" to buy stocks.
The Dow Jones industrials are down 52 percent from the record of 14,164 set in October 2007. They dropped 37 points Tuesday after a 300-point dive Monday.
The lower closing came despite Obama's assertion at the White House that the nation's financial mess "is going to get cleaned up" and similar bullish remarks on the economy's eventual recovery on Capitol Hill from Treasury Secretary Timothy Geithner, White House budget director Peter Orszag and Federal Reserve chairman Ben Bernanke.
It all prompted Rep. Ginny Brown-Waite, R-Fla., to tell Geithner at a House Ways and Means Committee hearing: "Mr. Secretary, I have mixed emotions about your being here. It seems every time that a statement is issued by you, the stock market plummets. I'm sure that's not something that you feel good about."
Geithner said, "There's just no way around it -- this is a serious economic crisis, something we haven't seen really in generations."
But like Obama, Geithner predicted aggressive steps taken by the government would help lift the economy out of the ditch.
Some Republicans were skeptical, even suggesting Obama and his team were "cooking the books" in rosy recovery predictions.
A shift in tone
After being accused for weeks of being too negative about the economy, Obama recently has shifted to a more positive tone. He and his aides still say recovery won't come quickly, but they are becoming more aggressive in declaring that the government's efforts will work.
They better work, Bernanke said. The country faces "a prolonged episode of economic stagnation" without bold policy moves, he told the Senate Banking Committee.
Separately, the Fed announced a long-awaited program to spur lending for autos, education, credit cards and other consumer loans by providing up to $200 billion in financing to investors to buy up the debt. If the program succeeds, it should help break economy-crippling credit clogs and make it easier for Americans to finance purchases large and small at lower rates, Bernanke said.
"What the economy requires, what the American people demand is that we move as aggressively as we can to get growth back on track," Geithner told the tax-writing Ways and Means Committee. "I'm confident this is the right path for the country."
Republicans were not so sure, accusing the new administration of raising taxes on many ordinary Americans as well as on the wealthy during a recession.
The administration acknowledges its energy proposal would increase costs for consumers but argues that the vast majority of people will get tax breaks elsewhere in Obama's budget package.
"Now, if people don't change how they use energy, then they will face higher costs for energy," Geithner said.
Obama, meanwhile, was asked about the stock market's swoon in recent days to levels not seen since 1997.
"What I'm looking for is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing," Obama said after meeting in the Oval Office with British Prime Minister Gordon Brown.
Sounding like an analyst, he said that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."
The president predicted a recovery "but it's not going to happen overnight."
He got a boost from Bernanke, who was appointed to the top Fed job in 2006 by President George W. Bush. Bernanke said Obama's recently enacted $787 billion stimulus package of increased federal spending and tax cuts should help revive consumer spending, boost factory production and "mitigate the overall loss of employment and income that would otherwise occur."
Bernanke testified that an economic recovery depends on the government's ability to stabilize weak financial markets.
Geithner and Orszag were grilled by Republicans on the tax portion of the budget.
In particular, GOP lawmakers complained about a section that would require polluters to purchase permits from the government for their greenhouse gas emissions, suggesting it would essentially impose huge new energy costs on all consumers and businesses. They also criticized a section limiting the charitable deductions that households earning over $250,000 a year can claim, saying it would burden charities.
"The president's budget increases taxes on every American, and does so during a recession," Rep. Dave Camp, R-Mich., told Geithner.
Geithner said the budget reflects what Obama views as "a deep moral imperative to make our society more just. But it's very good economic policy, too. It will mean there is again a fairer, more equitably shared tax burden on the vast majority of Americans."
Higher taxes for affluent Americans would not come until 2011 once "we are safely into recovery," Geithner said.
But some lawmakers challenged the administration's predictions for such a speedy recovery.
The budget forecasts that the economy, as measured by the gross domestic product, would shrink by just 1.2 percent this year and then snap back and grow by a solid 3.2 percent in 2010, followed by several years over 4 percent.
That's more optimistic than most private forecasts, and comes despite a new government report showing the economy contracted by 6.2 percent in late 2008, far more than the 3.2 percent drop first reported.
"It looks like somebody's cooking the books," Rep. Kevin Brady, R-Texas, told Geithner.
The Obama plan "does predict a somewhat more rapid recovery" than other forecasts, Geithner acknowledged. But, he added, "I believe this is a realistic forecast."
Questioning was pretty much along party lines. Democrats for the most part praised Obama's proposal.
"It is making the tax code more fair," Rep. John Lewis, D-Ga., told Geithner.
Obama's budget faces a difficult path through Congress because of its many controversial proposals on health care, taxes and global warming.