The economy is fundamentally sound despite the temporary “mess” it’s in, the White House said yesterday in the kind of upbeat assessment that Barack Obama had mocked as a presidential candidate. Obama’s Democratic allies pleaded for patience with an administration hitting the two-month mark this week, while Republicans said the White House’s plans ignore small business and the immediate need to fix what ails the economy. After weeks projecting a dismal outlook on the economy, administration officials – led by the president himself in recent days – swung their rhetoric toward optimism in what became Wall Street’s best stretch since November.During the fall campaign, Obama relentlessly criticized his Republican opponent, Sen. John McCain, for declaring, “The fundamentals of our economy are strong.” Obama’s team painted the veteran senator as out of touch and failing to grasp the challenges facing the country.
But yesterday, that optimistic message came from economic adviser Christina Romer. When asked during an appearance on NBC’s “Meet the Press” if the fundamentals of the economy were sound, she replied: “Of course they are sound.”
“The fundamentals are sound in the sense that the American workers are sound, we have a good capital stock, we have good technology,” she said. “We know that – that temporarily we’re in a mess, right? We’ve seen huge job loss, we’ve seen very large falls in GDP. So certainly in the short run we’re in a – in a bad situation.”
Just a week ago, White House Office of Management and Budget director Peter Orszag declared that “fundamentally, the economy is weak.” Days later, Obama told reporters he was confident in the economy.
“If we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation and dynamism in this economy, then we’re going to get through this,” Obama said, striking a tone that his top aides mimicked.
Despite the new enthusiasm at the White House and on Wall Street, there was little solid evidence to suggest an end was in sight to the severe recession that has already cost 4 million American jobs, driven down home values and sent foreclosures soaring. Meanwhile, Chinese Premier Wen Jiabao said he was concerned about the safety of the estimated $1 trillion his country has invested in U.S. government debt.
Obama sought to downplay the worries.
“There’s a reason why even in the midst of this economic crisis you’ve seen actual increases in investment flows here into the United States,” Obama said Saturday in the Oval Office. “I think it’s a recognition that the stability not only of our economic system, but also our political system, is extraordinary.”
The seesaw message from the new administration drew sharp criticism from Senate Republican leader Mitch McConnell, who said Obama’s team was exploiting the economic situation for political gain.
“They’re taking advantage of a crisis in order to do things that had nothing to do with getting us into the crisis in the first place,” McConnell said.
Democratic lawmakers promoted a potential plan to help move so-called toxic assets off bank ledgers. Rep. Barney Frank, D-Mass., said discussions were under way, but would not be rushed.
“If they wait a week or two more, no one ought to get all in a twitter about that. It’s very important to do it right,” he said.
Also yesterday, the president’s team largely rejected suggestions that officials were considering taxing employees’ health benefits. As a candidate Obama had called such a proposal a “multitrillion-dollar tax hike.”
“I’m not leaving the door open,” said Austan Goolsbee, a senior White House economist with a broad portfolio and a personal friendship with Obama, responding to a report in Sunday’s New York Times. “The president has laid out a series of clear principles on the health plan that we will do whatever it takes to get affordable quality coverage to all Americans.”
Romer said she wouldn’t take the idea off the table, but she added that Obama hasn’t supported it. Larry Summers, the president’s chief economic adviser, said it wasn’t part of Obama’s principles but left open the possibility of such a move from Congress, where Democrats control both chambers.
Republicans refused to accept Democrats’ plans. McConnell said the GOP would work to amend the proposal in the Senate, but not put forward a wholesale plan.
Rep. Eric Cantor, the GOP’s No. 2 leader in the House, promised an alternative budget, in part to counter Democratic attacks that his party provided only “no” but not other ideas and in part to help small businesses, whom Cantor said Obama ignores.
In contrast to Cantor’s charge, Obama planned to provide billions of dollars in federal lending aid aimed at struggling small business owners.
The broad package of measures to be announced Monday includes $730 million from the stimulus plan that will immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration loans to 90 percent, according to officials briefed on the plan who demanded anonymity because the announcement had not been made.