“I want to see a stimulus package sooner rather than later,” Obama told reporters during his first post-election press conference Friday, adding that if Congress and the White House cannot agree to legislation in a lame-duck session this fall, “it will be the first thing I get done as president of the United States.”
The press conference was meant to send reassuring signals to global markets that the two teams were working together on a smooth transition during these turbulent economic times. But Obama’s remarks also revealed some clear tensions between him and Bush when it comes to responding to the current crisis.
Obama also urged the Bush administration to “do everything it can to accelerate the retooling assistance that Congress has already enacted.” And he promised to make it a “high priority” for his transition team to explore additional policy to help the ailing auto industry — statements that could signal the president-elect plans to move more aggressively on Detroit’s behalf.
Obama’s economic remarks came with a new round of grim news on the economic front: The U.S. economy shed an additional 240,000 jobs in October — a staggering 1.2 million so far this year — while the jobless rate climbed to a 14-year high of 6.5 percent.
U.S. automakers Ford and General Motors also announced massive losses Friday, and both face a dire financial situation, including possible liquidation. This latest bad news comes on the back of the biggest two-day drop of the Dow Jones Industrial Average since 1987 over the first two days after the election.
Already, consensus has formed in policymaking and economic circles that the economic slowdown calls for a second stimulus package. House Democratic leaders have been particularly outspoken in support of a package that includes aid to states, infrastructure spending and an extension of unemployment benefits — a plan that closely mirrors the priorities laid out by Obama.
“That’s a lot of powerful tools if they are deployed effectively,” said Doug Elmendorf, senior fellow of economic studies at the Brookings Institute, who has advised members of Obama’s team.
But it remains unclear whether House and Senate leaders and Bush can agree on even a small package. The White House has been reluctant to accept those proposals during the final months of Bush’s presidency.
“Clearly, there is no point in us doing something if the administration takes the position that they're not going to sign something,” said House Majority Leader Steny H. Hoyer (D-Md.).
And economic stimulus, even for those who believe it can help, won’t trigger an immediate turnaround.
“It will help, but you have to realize it’s going to take a while to have an impact,” said Standard & Poor’s chief economist, David Wyss. In particular, he said, elements such as infrastructure may take time to ramp up, so “don’t expect that to help until this time next year.”
Economists say that the other two major areas Obama can address in the hopes of improving the economy are continuing current efforts to steady financial markets and taking steps to stem foreclosures.
Administration officials are currently working on plans to create a more systematic way to do loan modifications to keep more people in their homes. And there’s a good possibility that a new plan could emerge before Obama takes office on Jan. 20, 2009, though Treasury has indicated its desire to have the Obama team sign off on major decisions related to the $700 billion financial rescue plan.
Moreover, the incoming administration will be able to shape how much of the money will be used. So far, Treasury has only used the money to make direct investments into large financial institutions. “There’s certainly room to do much more,” Elmendorf said.
Possibilities include extending the government investments to other institutions — the U.S. automakers are one potential recipient already being talked about — as well as using the money to somehow entice mortgage lenders and servicers to modify distressed loans. Finally, the Obama White House could go forward with the initial plan for the $700 billion package and purchase distressed assets directly.
Obama opened his press conference with bold words clearly meant to comfort individual and market anxiety, promising that he’ll “confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity.”
But for all confident words, Obama will take over the White House at a time when the country has nearly a $1 trillion deficit, a worsening economy and a still-frozen credit market — a backdrop that makes it impossible to quickly fulfill campaign promises of energy investment and health care reform.
“He’s taking over with a very changed, completely limiting fiscal landscape, and every single decision Congress is going to make is going to be made in that context,” said Bruce Josten, top lobbyist for the U.S. Chamber of Commerce.
“You’ve got to stop the slide,” Josten said, “because if you want to do anything else, you’ve got to fix the economy first.”