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Obama seeks to avoid 'catastrophe'

February 10, 2009

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Barack Obama warned Americans on Monday that economic crisis could turn into catastrophe if the federal government does not take decisive action to create jobs and stabilise the financial sector.

The president delivered the bleak assessment live on primetime television in his first White House press conference since taking office.

His remarks stepped up pressure on Congress to approve the proposed $800bn fiscal stimulus and prepared the ground for Timothy Geithner, Treasury secretary, to announce a fresh financial rescue package on Tuesday.

Mr Obama acknowledged that government alone could not solve the crisis and insisted his proposals were aimed at reviving the private sector. But he said the federal government was "the only entity left with the resources to jolt our economy back to life". 

"It is only government that can break the vicious cycle where lost jobs lead to people spending less money which leads to even more layoffs," he said. "And breaking that cycle is exactly what the plan that's moving through Congress is designed to do."

The Senate is expected to approve its $838bn stimulus bill on Tuesday after weeks of fractious and partisan debate. But more tough negotiations will be needed to reconcile the plan with the $819bn House of Representatives bill that passed last month.

"The strongest democracies flourish from frequent and lively debate, but they endure when people of every background and belief find a way to set aside smaller differences in service of a greater purpose," he said.  "That is the test facing the United States of America in this winter of our hardship, and it is our duty as leaders and citizens to stay true to that purpose in the weeks and months ahead."

Mr Obama highlighted the billions of dollars in tax cuts contained in both the House and Senate stimulus bills but rejected Republican calls for more.

"As we learned very clearly and conclusively over the last eight years, tax cuts alone cannot solve all our economic problems - especially tax cuts that are targeted to the wealthiest few Americans," he said. "We have tried that strategy time and time again, and it has only helped lead us to the crisis we face right now."

He acknowledged that the stimulus plan was "not perfect" but said doing nothing was not an option.

"My administration inherited a deficit of over $1,000bn but because we also inherited the most profound economic emergency since the Great Depression, doing too little or nothing at all will result in an even greater deficit of jobs, incomes; and confidence," he said. "That is a deficit that could turn a crisis into a catastrophe. And I refuse to let that happen."

The press conference came hours after Mr Obama held a campaign-style meeting in Indiana as part of an increasingly aggressive bid to win public support for his economic plans in the face of stiff Republican resistance. He is due to hold a similar event in Florida on Tuesday.

Separately on Tuesday, Mr Geithner is scheduled to announce an overhaul of the troubled asset relief programme and additional measures to clean up bank balance sheets and reducing housing foreclosures.

Copyright The Financial Times Limited 2009


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