Obama reassures nervous nation on ailing economy

Thursday 27th November, 06:05 AM JST

CHICAGO —

President-elect Barack Obama sought to reassure the nation and nervous holiday shoppers about the ailing economy Wednesday as beleaguered stores braced for their most important month of the year.

“Help is on the way,” he proclaimed at his third news briefing on the economy this week. Fifty-five days away from taking office, he declared he would have an economic plan ready for action “starting day one.”

Investors’ improved spirits kept pace. The Dow Jones industrials climbed 247 points, marking the first time since last spring that the average had risen for four straight sessions.

To help with ideas from outside the White House, Obama announced he was forming a new team of advisers with former Federal Reserve Chairman Paul Volcker as the head.

“There is no doubt that during tough economic times family budgets are going to be pinched,” Obama said. “I think it is important for the American people, though, to have confidence that we’ve gone through recessions before, we’ve gone through difficult times before, that my administration intends to get this economy back on track.”

The crucial holiday shopping season gets under way in earnest on Friday, the day after Thanksgiving, with deep discounts already in place as stores try to lure buyers who are worried about their jobs and homes.

Volcker, 81, will head the President’s Economic Recovery Advisory Board. The board’s top staff official will be Austan Goolsbee, a University of Chicago economist, Obama said.

Volcker is no stranger to economic crises, having led the Fed under two presidents from 1979 to 1987. Volcker is a legendary central banker who raised interest rates and restricted the money supply to tame raging inflation in the 1980s. It was a painful prescription that helped send the economy into one of the nation’s worst recessions.

However, he is largely credited with ushering in nearly three decades of relatively low inflation — an unthinkable feat in the 1970s, when the country was grappling with high unemployment, high interest rates and ever-rising prices.

“He pulls no punches,” Obama said of Volcker. “He seems to be fairly opinionated.”

Obama spoke as businesses were preparing for what many fear could be a disastrous month. And there was more bad news on the economy’s current state.

The government reported Wednesday that jobless claims had remained at recessionary levels, consumers had cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to U.S. factories had plunged anew and home sales had fallen to the lowest level in nearly 18 years.

Still, investors produced the Dow’s fourth straight day of gains.

Fresh government bailout programs this week were given much of the credit. But Obama’s encouraging words seemed to help as well.

“People should understand that help is on the way. And as they think about this Thanksgiving shopping weekend, and as they think about the Christmas season that is coming up, I hope that everybody understands that we are going to be able to get through these difficult times,” Obama said. “We’re just going to have to make some good choices.”

As for his own choices for top officials, he defended his selection of former Clinton officials to help run his administration.

“The American people would be troubled if I selected a treasury secretary or a chairman of the National Economic Council at one of the most critical economic times in our history who had no experience in government whatsoever,” Obama said.

“What we are going to do is combine experience with fresh thinking,” he said. “But understand where the vision for change comes from. First and foremost, it comes from me. That’s my job.”

Obama said he will announce the remaining members of his new economic panel in the coming weeks. He already has named New York Federal Reserve President Tim Geithner as his treasury secretary and Congressional Budget Office Director Peter Orszag as his candidate to run the White House Office of Management and Budget.

Geithner was a Treasury Department official during the Clinton administration, and Lawrence Summers, who will head Obama’s National Economic Council, was Clinton’s treasury secretary. Other Clinton administration names include Eric Holder, who will be Obama’s attorney general, and Rahm Emanuel, the president-elect’s chief of staff.

“What I don’t want to do is to somehow suggest that because you served in the last Democratic administration, that you’re somehow barred from serving again,” Obama said. “Because we need people who are going to be able to hit the ground running.”

Obama said his new economic panel will include people from business, labor and academia, “who will bring to bear their wisdom and expertise on the formulation, implementation and evaluation of my administration’s economic recovery plan.”

His economic team largely complete, Obama is expected to introduce national security officials next week, including Hillary Rodham Clinton as his secretary of state. He is expected to announce he has asked Defense Secretary Robert Gates to remain at the Pentagon for a year. James Jones, a former Marine Corps commandant and NATO commander, is Obama’s pick to be national security adviser.

Stephen Ohlemacher reported from Washington.

› Login to comment

Latest 15 of 24 Total Comments Show All

SushiSake3 at 04:52 PM JST - 27th November

sabiwabi - do you reckon Obama's team could burn up your tax dollars faster than the Bush Administration has?

It would be quite a feat if he could.
sabiwabi at 04:57 PM JST - 27th November

Looking at who he is choosing to surround himself with, and who his backers are, I can't see why it would be any different. It might even be worst.
Sarge at 04:58 PM JST - 27th November

"do you reckon Obama's team could burn up your tax dollars faster than the Bush administration?"

There's no doubt. He has a spend-happy Democrat-led Congress to help him do it, too.
Betzee at 05:00 PM JST - 27th November

Just look at the people he is picking, some of them played important roles in creating this mess. Just because these guys will soon be lead by someone that keeps on saying "CHANGE" not not mean they will change their behavior and suddenly become honest.

Some were involved in deregulating the use of credit derivatives, but that was a Republican initiative at heart. No one pushed harder for it than Phil Gramm.

The GWB administration is responsible for the bail-out thus far; if you're dissatisfied you know where to take your concerns. Moreover, Treasury Secy Paulson is also a creature of Wall Street. Yet GWB has ceded incredible authority to him to dole out public money to ailing financial sector concerns with very little oversight. Do you agree with the way he has used it? Specifics please.

Obama, president elect, has been out there trying to provide reassurance. GWB, still president, by contrast has been missing in action since Lehman Brothers collapsed. The change is evident in Obama's hands on leadership rather than simply delegating to others.
SushiSake3 at 05:00 PM JST - 27th November

Who are his backers?

Are any of them likely to encourage Obama to start a pointless war like GWB's did?

And are any of them likely to encourage Obama to yank roughly $2 trillion out of America and spend it on a foreign country and foreigners, like GWB's backers did with Iraq?
SushiSake3 at 05:01 PM JST - 27th November

Sabiwabi - "It might even be worst.2

Than Bush? That's really funny, not to mention pretty much impossible. :-)
SushiSake3 at 05:04 PM JST - 27th November

Sarge - "He has a spend-happy Democrat-led Congress to help him do it, too."

Sarge, you forgot to compare that "spend-happy Democrat-led Congress" with the spend-happy Republican party that for 8 long years, rubber-stamped every spending bill Bush put in front of it. :-)
Betzee at 05:16 PM JST - 27th November

Reorienting the US economy will be Obama's test:

This country earned its wealth by making things that worked well, not by purchasing an army of conquest with a Chinese credit card or passing a flim-flam pyramid scam as an innovative form of financing. There is a great moral failure in our short sightedness and selfishness. Where is the basic decency and practicality of a man like Dwight Eisenhower who said he would rather build washing machines than tanks? I hope that President Obama has the courage to follow the kind of course that led Eisenhower to build the interstate highway system. For the 21st century, we need an efficient rail transportation system. We need rational regulation of financial system so we dont have to relive the crash of 29, the savings and loan debacle, and the phony mortgage bubble all over again.
Sarge at 05:23 PM JST - 27th November

Sushi, the Democrats have had the majority in Congress since 2006. I'm not saying the Republicans aren't spend happy, but compared to the Democrats, they're a bunch of tightwads!
Betzee at 05:34 PM JST - 27th November

Sorry, Sarge, conservative George Will crunched the numbers and arrived at a different conclusion:

Conservatives have won seven of 10 presidential elections, yet government waxes, with per-household federal spending more than $22,000 per year, the highest in inflation-adjusted terms since World War II. Federal spending -- including a 100 percent increase in education spending since 2001 -- has grown twice as fast under President Bush as under President Bill Clinton, 65 percent of it unrelated to national security.
sabiwabi at 08:24 PM JST - 27th November

Moreover, Treasury Secy Paulson is also a creature of Wall Street. Yet GWB has ceded incredible authority to him to dole out public money to ailing financial sector concerns with very little oversight. Do you agree with the way he has used it? Specifics please.

Paulson is also a creature of Goldman Sachs. Conveniently, they let Lehman Brothers, competitor of GSachs, fail but they rushed to save friends of GSachs. I believe some of the people around Obama have close ties to GSachs.

Fanny Mae was a complete sham, a person responsible for this Fanny mess is now one of Obama's trusted financial adviser. And Obama got lots of money from Fanny Mae. There is something very wrong when you have people who should be in jail, but instead become advisers to the US president.
Betzee at 12:49 AM JST - 28th November

Conveniently, they let Lehman Brothers, competitor of GSachs, fail but they rushed to save friends of GSachs.

Lehman Brothers lacked a clearing arm, to "process" trades. Letting it go under would not freeze the system used to credit accounts. It's always best, in my book, to eliminate other explantions before settling for the conspiracy theory.

Fanny Mae was a complete sham,

A rather bit player in the mess. It got into subprime mortgages at the urging of its broad who saw how profitable it was for the private sector. FM's mismanagement pales in comparison to that of Citigroup, which just received its second bail-out.

And Obama got lots of money from Fanny Mae.

McCain's top advisor was also on their payroll.

There is something very wrong when you have people who should be in jail, but instead become advisers to the US president.

Current laws do not prohibit accepting money. It's no more illegal than someone who took money from Enron advising a president. (Hint: that's a precedent you might want to look into).
SezWho2 at 12:50 AM JST - 28th November

Maybe what is wrong is the assumption that the people should be in jail.
taniwha at 07:24 AM JST - 28th November

Sushisake3

Who are his backers? Are any of them likely to encourage Obama to start a pointless war like GWB's did? And are any of them likely to encourage Obama to yank roughly $2 trillion out of America and spend it on a foreign country and foreigners, like GWB's backers did with Iraq?

Good question. But the answer has been there waiting for everyone to fall over it for a long while. Obama is backed principally by Wall Street corporate interests, and it is those interests he will be protecting. The evidence has been there in his statements prior to his successful election campaign.

Ultimately, Obama will do much better at softening the blow for the average financially stricken American than his predecessor, simply because he represents the moderate section of America's ruling elite. They believe extreme measures without being accompanied by an apparent effort to look after the 'average' citizen will lead to a social revolt against the political structure. They are right. But this cannot be avoided. Objective conditions have smashed their way through the front door and simply denying that the capitalist system has nothing more to offer other than pain and destruction will change that fact. Capitalism has been extremely useful in that it has rocketed technological and scientific advances that mostly benefit us all, but now it has expired, as most everything does eventually. We must move on or be trapped in a terminally diseased political and social system.

Obama is unlikely to turn into a socialist. He is a protector of the present system and intends to push forward at greater speed down the path America and the world is already on. He has made serious threats of military action against Iran. He supports the war in Afghanistan. The war on terror is designed to provide a smokescreen to cover the massive and continued dismantling of democratic rights. A financial dictatorship is what we are living under at present. This will lead to a political dictatorship and that inevitably will result in a military dictatorship. The pace towards this nasty outcome increases as social pressures build, and Obama clearly understands this.

So people should stay alert and think outside of the extremely limited paradigm they are being presented with by their leaders. The destabalising effects of the continued 'war on terror' is likely to lead to major conflict between the most powerful countries in the world. A military strike against Iran would most definitely be the start of something terrible. So, yes, Obama will be investing in foreign countries, the ones targeted for the resources by America's financial elite that stand behind Obama.
taniwha at 07:27 AM JST - 28th November

A few typos above but it'll do.