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2009-03-04 10:27:18
By TOM RAUM, Associated Press Writer Tom Raum, Associated Press Writer 1 min
ago
WASHINGTON Trying to pump up the nation's confidence, President Barack Obama
said that Wall Street has been hammered so hard that "buying stocks is a
potentially good deal," and he dispatched top aides to Capitol Hill to defend
his plans for pulling the economy out of its deep recession. The stock market
slipped ever lower, and Republicans suggested Obama was "cooking the books" in
rosy recovery predictions.
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, Federal Reserve Chairman Ben 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," Treasury Secretary Timothy
Geithner told the tax-writing House 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
during a recession on many ordinary Americans as well as on the wealthy.
Underscoring the economy's weakness, Detroit's Big Three automakers reported
huge U.S. sales declines for February from a year earlier 53 percent for
General Motors Corp., 48 percent for Ford Motor Co. and 44 percent for Chrysler
LLC.
On Wall Street, the Dow Jones industrials lost 37 points, but stocks have been
falling so fast 300 points on Monday alone that the new decline seemed
quite modest.
Obama's plan envisions a deficit of $1.7 trillion this year followed by several
more years of trillion-dollar shortfalls.
"The new administration has inherited an economic crisis unlike any we have
seen in our lifetimes," White House Budget Director Peter Orszag told the House
Budget Committee.
The administration acknowledges that 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 acknowledged.
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.
"You know, it bobs up and down," he said, comparing stock market movements to
daily tracking polls during political campaigns. "The banking system has been
dealt a heavy blow," he added. "There are a lot of losses that are working
their way through the system. And it's not surprising that the market is
hurting as a consequence."
Sounding ever more 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.