President Obama interview on Economic Recovery

Edited transcript of the USA TODAY and Detroit Free Press interview with President Obama:


Q: The summit that's coming up and then the subsequent travel you'll be taking to communities around the country — I'm wondering if you can sort of start us off by telling us what's your greatest fear and your greatest hope in terms of where the job situation goes from here, say, for the next six to 12 months.
OBAMA: Well, let me provide a context for where we are. Because of the financial crisis we were hemorrhaging jobs at the beginning of the year — 700,000 jobs per month in the first quarter of this year.

Our first job was to make sure that you didn't have a complete financial meltdown. We've succeeded in that. Our second job was to limit the damage from the financial crisis on Main Street — and what that meant was a Recovery Act that would help states not have to lay off police and firefighters and teachers, all of which would have a broader effect on the economy. We passed a tax cut to put more money into people's pockets, 95% of workers.

Those kinds of steps — unemployment insurance — all designed to keep demand up for basic consumer goods help people and states. And as a consequence of those steps, we have been able to get lending flowing again to some degree, and we're starting to see economic growth for the first time in a year and the fastest economic growth we've seen in a couple of years.
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Article links:
OBAMA: Don't expect additional stimulus spending from feds
JOBS: Obama looking for 'new ideas'
THE OVAL: Full coverage of USA TODAY interview with Obama
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We always understood that job growth would lag economic growth because businesses have to feel some confidence that there's growing demand for their products before they start hiring back again. But frankly, the steep decline in jobs was a lot worse than any economist modeled at the beginning of the year. And so now you've got essentially a 7 million to 8 million gap between where jobs should be for relatively full employment and where we are.

That is my greatest fear, is we don't close that gap. And one of the things that we're having to deal with right now — this is not unique to this recession, it's actually been a trend that we've been seeing over the last several business cycles — is businesses, once they lay off, they're actually learning to be so efficient and increase their productivity so much that they can make the same number of goods without as many people. And so in the '90s, when you had a cycle or recession and then later, briefly at the beginning of the Bush administration, what you saw was a jobless recovery, where economic growth went up, corporate profits went up, stock market went up, but job growth did not go up.

So what we've got to do is to figure out, A, how do we keep economic growth going — because if the economy is not growing, jobs won't follow; but even if we have solid economic growth, how do we accelerate job growth. And that's the goal of this summit and a lot of the ideas that we've been working on. A, how do we accelerate businesses to hire again, but, B, also how do we generate the jobs of the future, the well-paying jobs that can support families. And that's going to require, I think, a whole new set of strategies around clean energy, around how we build infrastructure in this country, how we deal with a lot of occupations that are very important to the society but frankly just don't pay well right now. There are a whole set of workforce issues that we're going to have to tackle.



Q: You said what your greatest fear is. What's your greatest hope? How quickly — with some of the issues that we'll talk about, some of the policies that you might be going through today — how quickly could things turn around, do you think?
OBAMA: Well, I think that with economic growth on the uptick, if we can sustain that — and I believe that we can moving forward — then businesses are naturally going to start saying to themselves, you know, I'm getting more orders here and my workers are getting overworked, I need to hire more. Small businesses who start seeing the credit markets thaw a little more are going to say, it's worth it now for me to borrow this much to expand my operation and maybe hire a few more workers.

So, you know, you start getting positive momentum as opposed to negative momentum — and that will help.

But as I indicated before, the number of job losses over the course of this year and the previous year have been so substantial that we may end up having to take some additional measures in order to really drive the unemployment rate to where it needs to be. And some of the ideas that I mentioned — around clean energy, around infrastructure — those are the kinds of things that will not only jump-start job creation now, but they'll also, I think, lay the foundation for the kind of robust economic engine that we need for the 21st century.




Q: How can you craft a program large enough to help the millions of Americans who are unemployed without some kind of additional deficit spending?
OBAMA: Well, this is a challenge. This would be hard already; it's harder given our fiscal constraints.

Something that I think is very important for people to understand, because I think there's been some misinformation about the nature of our deficits: We came in, the day I took office, inheriting about $8 trillion worth of debt. We have a structural deficit where we've just been spending more than we've been taking in. A lot of that is around entitlement programs like Medicare. A lot of it also has to do with sizable defense spending. Not much of it, actually, has to do with non-defense discretionary spending; that is a relatively modest part of the overall problem.

What you then saw is tax revenues just completely collapse because of the depth of the recession. And what you also saw was that we had to take some extraordinary steps around rescuing the financial system, but also providing things like unemployment insurance.

So, all told, we are in a pretty deep fiscal hole. But I do think it's important to recognize that out of the maybe $9 trillion that we've got to make up, only about a trillion of it arose out of the stimulus package that we put together, as well as the additional support that we provided to some big systemic institutions to keep them afloat.

Moving forward, it is not going to be possible for us to have a huge second stimulus, because, frankly, we just don't have the money. It is possible for us to, I think, be surgical and say, are there ways that public dollars can be leveraged into greater private spending? So let me give you a couple of examples.

We have been exploring the ways that we can use the need to retrofit and weatherize homes to drive down energy costs to create a version of — you know, similar to what we did with Cash for Clunkers, where we essentially say to the private sector — the Home Depots and the Lowe's — let's see if we can incentivize people to insulate their homes and get contractors working again, and suddenly generate more private activity because there's an incentive in place that the government is providing.

On the jobs front more directly, there are a range of ideas that are being looked at on tax credits that could tip an employer who is on the fence — they see that there's some business to be had out there but they're not quite sure yet whether they want to spend the money — it's possible that a little bit of a nudge from a tax break could make the difference.

So what we're trying to do is to be strategic and think, where are the areas where what we do on the government side can help to incentivize and move the private sector to invest? And there's a lot of money on the sidelines in the private sector. It's just that they are still nervous about whether they want to go ahead and take the risks that are inherent in a free market system.



Q: Is that to say that you're going to need to do some sort of deficit spending in order to get the economy moving again, whether it's — even if it is just infrastructure banks and things like that to try to spur the private sector? It's not deficit — the economists say it's not —
OBAMA: It's not stimulus. Look, here's the bottom line I think for everybody to understand. We don't want to be taking money out of the system right now, whether it's raising taxes or cutting spending, because the big problem we have is that there's still just not a lot of demand out there. Consumers are still pulling back or dealing with paying off their credit cards, or what used to be home equity loans has now turned into a situation where their mortgage is underwater. So there's still a lot of that deleveraging that's taking place.

It would be a mistake, and actually counterproductive, even in terms of cutting the deficit, if we pulled in the reins too tight and you suddenly saw the possibility of a double-dip recession.

What we do have to make sure of is that any steps that we're taking now to spur economic growth and job growth is matched with a plan for the medium- and long-term to get a handle on our deficits. And I think that's potentially complementary. The most important thing we could do for our deficits is to have robust economic growth and have people working and businesses selling products and they're paying taxes. That's a hole that we can fill.

But if we move too abruptly in that direction and we're not thinking about all the people out there who aren't working and businesses who aren't making money, then we're going to be in a negative spiral that I think would be very destructive.


Q: Quick questions on individual policies that will be discussed today.
OBAMA: Sure.



Q: One is small business and credit. Are banks doing enough at this point to extend credit to small business, or should they be freeing up more credit? Is there anything the administration can do along those lines, given that you don't necessarily have the power that you had earlier this year —
OBAMA: Well, we have taken a series of significant steps to try to increase small-business lending. We've increased, for example, the Small Business Administration loans by 73% since we came in. We're exploring further ways that can loosen up credit for small businesses. You really have two credit markets right now. We have stabilized the financial system enough that if you are a big credit-worthy corporation, you can get the money that you need, you can get the credit that you need for your operations.

Small businesses, mom-and-pop businesses, often who are more reliant on small banks, they're having some tough problems. And I think that there's a perception that it was just the big banks that were in trouble, not the small banks. The truth is, the community banks, the local banks, they were very involved in commercial real estate. That is a problem that is actually still there, it has not bottomed out, and was in some ways just as significant, although not as large, as the housing market problem that we saw.

And so what we're trying to figure is how do you, on the one hand, help make sure that the banks, both large and small, are engaging in prudent practices, but on the other hand that they're not pulling back so much that businesses can't get credit, and where can we strategically fill the gaps. And using the SBA, looking at are there ways that we can further incentivize banks to take risk, those are all some big challenges.

And I'll be very honest with you, the TARP funding, which could give beneficial rates to banks that they could then in turn lend, carries with it for a lot of banks the unattractive prospect of the government being involved in their compensation. And we've had to balance, on the one hand, understandable taxpayer outrage that we're bailing out banks and they're giving out big bonuses. On the other hand, because of the constraints that we placed on that, you had a lot of banks saying we don't want to take any TARP money or we want to pay it back as soon as possible. And that gives us less leverage over these banks than we might otherwise like.

But I am convinced that the banks can be doing more than they're doing, and I think that it's important for them to understand the American people stepped up when they made some very bad calls and pulled them out of a very, very bad situation. They have to feel some sense as well that it's time for them to give back. And so we're going to be pushing them pretty hard in the months to come.


Q: Around Michigan, Michigan has led the nation in unemployment for nearly four years now. In parts of Detroit, the unemployment rate is one in three workers. What do you say to people who are coming up now on a year without having work?
OBAMA: Well, the first thing I'd say is I am painfully aware of how tough the situation is. One of the frustrations of being president is you're stuck in the White House a lot more than you'd like to be. And even when you're traveling, you've got this bubble around you.

But Michelle and I have family members who are out of work. It hasn't been that long since I was in some of the neighborhoods that are going through these tough times. And we know the desperation and difficulty that people are feeling, as well as the pride and dignity that work brings, and the fact that they don't want a handout; they just — they want to be given a chance to support their families and do better in their lives.

We have taken a series of steps that have made a bad situation somewhat better. I mean, had we not passed the Recovery Act, had we not stepped in on GM and Chrysler, things obviously would be a lot worse. But that's not good enough. And so the steps that I've talked about, in terms of short-term job stimulus, is going to be important.



Q: Yesterday the Congressional Black Caucus held a protest in the House committee for what they said was an avoidance of the problems of black Americans who are facing the brunt of the recession, while policy has been, in their words, "defined by the worldview of Wall Street." What's your response to that criticism?
OBAMA: Well, look, I understand people's frustrations. As I said, Michelle and I have family members who are unemployed, and the African-American unemployment rate is even worse than for the general population.

We worked with the Congressional Black Caucus very specifically on each of the items that they have been interested in. Some of them, I think, are entirely legitimate concerns about, you know, are black businesses, in particular, getting credit; are we making sure any programs that are run by the federal government, that they are accessible to all people and not just some people.

But I will tell you that I think the most important thing I can do for the African-American community is the same thing I can do for the American community, period, and that is get the economy going again and get people hiring again. And I think it's a mistake to start thinking in terms of particular ethnic segments of the United States rather than to think that we are all in this together and we're all going to get out of it together.

Q: Would you rule out, at this point, some sort of a public jobs program like CETA of the 1970s, where the government actually creates the jobs?
OBAMA: Here is the problem that we have — is that given our resource constraints, there are probably limits to the number of jobs that can be generated through the public sector. We are probably better off using public sector dollars to try to leverage and increase the number of private sector jobs. That doesn't mean that there may not be some particular populations — for example, teenagers in rural and inner cities that are having a very difficult time may have unemployment rates of up to 50% in some areas — where just a summer job program might not be very important — to give them the kind of work experience that when the economy gets better, it gives them a ladder into the economy. So there are going to be some selective areas that we're looking at. But ultimately, if we're going to fill 8 million jobs, we're going to have to do it through the private sector.

Q: Let me ask you a quick question about state aid, because a lot of people say we're going to need to do something to fix the state budgets, which are going into 2011, whereas the stimulus money runs out in 2010. Can you put strings on the type of aid that might turn out to be part of this — I won't call it a package, but whatever policy comes out of this process? Can you put strings, so that you don't have governors, perhaps Republican governors, cutting taxes with that money or something like that?
OBAMA: We are going to do everything we can to make sure that any federal aid that's provided to the states is actually helping people in those states who are in desperate straights. And I think most governors out there are desperate for help and want to do the right thing by their constituents.

But I do think it is important to recognize that if we are willing to engage in some deficit spending to help fill state budget holes, that our expectation is that teachers are kept in their jobs, police officers are kept in their jobs, firefighters are kept in their jobs, basic vital services are maintained; that that's what the money is used for, not political maneuvering that makes the governor look good and is not fair to those other states that are doing the right thing.

Let me just make one last point, because I know we're running out of time. We are going through the worst economic crisis since the Great Depression. I want people to understand that it is an extraordinary feat — not just of government, but I think the entire country — that as tough of a blow as this was, we've stayed on our feet. We have managed through this crisis in a way that a lot of people were fearful we couldn't do. And we should take confidence from that. We should take pride in that. We've still got a long way to go, especially on the jobs front.

But the truth of the matter is, is that this economy is on the upswing. We remain the most dynamic economy on Earth, the best universities on Earth, the best science and technology on Earth, the most productive workers around. And if we can get some key things right on energy, stop having health care be such a drag on our economy, make sure that our education system is working the way it needs to, get control of our federal budget as we recover — if we can take those key structural steps, I am absolutely confident that we will bounce back just like we always have before. But it's going to take some work, and it's going to take some time. And it's going to require some patience on the part of the American people.



Q: Can I ask you a quick question on the way out? What is your feeling, and I don't think we've had — on the incident that happened at the state dinner and whether you feel at all threatened by that?
OBAMA: I think, clearly, the system didn't work the way it was supposed to. Having said that, I could not have more confidence in the Secret Service. They do an outstanding job. They have been with me since I was a candidate. I trust them 100%, not just with me, but with my wife and my children."