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Obama attacks Republicans in Congress for economic 'irresponsibility' over debt
Obama accuses Republicans of holding recovering US economy to ransom
(about 2 hours later)
In a blistering warning to congressional Republicans, President Barack Obama said on Monday it would be the "height of irresponsibility" for lawmakers to cause a new economic crisis just five years after the near-collapse of the nation's financial system.
Barack Obama on Monday accused his Republican opponents of holding the economic recovery to ransom, as the US faces another deadline over its borrowing limits.
"I cannot remember a time when one faction of one party promises economic chaos if it can't get 100% of what it wants," Obama said, contending that the stance of some conservative lawmakers amounts to just that.
In a speech that was overshadowed by news from Syria and fatal shootings at the Washington Navy Yard, Obama said he would not negotiate over an extension of the US debt ceiling as part of an escalating budget battle in Congress.
Some of those Republicans say they will vote to extend current spending levels or to increase the nation's debt ceiling only if Obama delays putting in place his healthcare law, a condition Obama has rejected. Others say that scheduled spending cuts should stay in place to reduce the deficit, while Obama wants such "sequestration" cuts reworked.
"I cannot remember a time when one faction of one party promises economic chaos if it doesn't get 100% of what it wants. That's never happened before. But that's what's happening now," said Obama.
The president spoke at a White House event pegged to the fifth anniversary of the bankruptcy of the Lehman Brothers investment bank, which marked the beginning of a global financial crisis. The White House used the anniversary to lay out the president's markers for upcoming fiscal fights with Congress over funding the government and raising the nation's debt limit.
In a speech marking five years since the start of the financial crisis that triggered the deepest recession in living memory, Obama said much progress had been made in rebuilding the US economy but much more remained to be done.
Obama reiterated his refusal to negotiate with Republicans over the debt ceiling. And he called on Congress to "pass a budget without drama".
Republicans are attempting to force more spending cuts and remove funding for Obama's 2010's affordable healthcare act, known as Obamacare, as they negotiate an agreement on the 2014 fiscal budget that begins on 1 October.
The president was flanked by members of the public the White House said had benefited from his administration's economic and banking policies. Those policies, Obama said, have laid a "new foundation" for economic growth, though he acknowledged that the recovery is not being felt by many middle-class people.
In 2011, a similar row led to an historic downgrade of the US's debt rating and caused panic on financial markets around the world. "I will not negotiate over whether or not America keeps its word and meets its obligations," Obama said. "I will not negotiate over the full faith and credit of the United States."
On Sunday, the White House's National Economic Council issued a report detailing policies that it says have helped put the economy on a path toward growth. Those steps range from the unpopular Troubled Asset Relief Program, or Tarp, that shored up the financial industry and bailed out the auto giants General Motors and Chrysler, to an $800bn stimulus bill and sweeping new bank regulations.
Obama said the financial crisis had "sent an economy already into recession, into a tailspin". Five years after the collapse of the Lehman Brothers investment bank, which precipitated the financial meltdown, Obama said: "It's hard sometimes to remember everything that happened during those months, but in a matter of a frightening few days and weeks some of the largest investment banks in the world failed, stock markets plunged, banks stopped lending to families and small businesses, our auto industry – the heartbeat of American manufacturing – was flat-lining."
Gene Sperling, a top Obama adviser and director of the National Economic Council, said Obama's policies "have performed better than virtually anyone at the time predicted". But the public is not convinced that the economy is on the mend. Only one-third say the economic system is more secure now than in 2008, and 52% say they disapprove of Obama's handling of the economy, according to a Pew Research Center poll. There is still plenty of pain to justify their pessimism.
Obama said the US had "cleared away the rubble from the financial crisis and we've begun to lay a new foundation for economic growth and prosperity".
Despite job growth, the unemployment rate remains high at 7.3%. Though the rate has fallen, one of the reasons for that fall is that some people have dropped out of the labor force and no longer are counted as job seekers. The share of unemployed workers who have been unemployed for more than six months is more than double what it was in 2007, before the recession began. And the income gap between the very rich and the rest of the population is the biggest since 1928.
In the last three and a half years, the economy has added 7.5m new jobs and the unemployment rate has come down, Obama said. "Our housing market is healing. Our financial system is safer," he said.
Furthermore, some banks which received government aid because they were deemed "too big to fail" are now bigger than they were in 2008, although they are smaller as a share of the economy than the largest banks in other big economies. Three years after Obama signed a sweeping overhaul of lending and high-finance rules, execution of that law is behind schedule.
He said more work needed to be done and the economy had to grow faster. "Because even though our businesses are creating new jobs and have broken record profits, the top 1% of Americans took home 20% of the nation's income last year, while the average worker isn't seeing a raise at all," Obama said.
Anxious to make his case with the public, Obama intends to draw attention to signs of progress with daily events, including a speech on Wednesday to the Business Roundtable, an association of CEOs from the top US companies, and a trip on Friday to Kansas City to visit a Ford plant, where he will promote the strength of the auto industry.
Obama said the fight over the US's debt ceiling threatened that recovery. If Congress does not reach an agreement soon, treasury secretary Jack Lew has said the US will reach its borrowing limit in mid-October and will likely be unable to pay all its bills soon after. In a letter to Washington leaders last month, Lew warned such a situation would do "irreparable harm" to the US economy.
Obama wants to reverse automatic spending cuts that kicked in in March, but at the same time he has said he will not negotiate with Republicans over the nation's debt ceiling. His remarks have hinted at a potential constitutional confrontation with Republicans. Section 4 of the 14th Amendment says that "the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned".
"After all the progress that we've made over these past four and a half years," said Obama, "the idea of reversing that progress because of an unwillingness to compromise or because of some ideological agenda is the height of irresponsibility. It's not what the American people need right now."
In addition to seeking a delay in Obama's healthcare law, some Republicans say the scheduled spending cuts should stay in place, in order to reduce the deficit.
"We need to start by keeping the cuts we've already agreed to," Senator Mitch McConnell, the Republican minority leader, said on Sunday. "It's time to get serious about the challenges we face and reposition America for growth and prosperity in the 21st century."
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