Monday, July 11, 2011

A Presidential Address on the Debt Ceiling Negotiations

Good evening,

Over the past few months our nation and our leaders in government have been involved in monumental negotiations over the Federal budget, the statutory limits on our public debt, and in some ways, the fundamental principles of the country itself. These are all vital discussions. They have inspired a torrent of activism from both of our major parties and have taken such a powerful hold over our national conversation that there has been room for little else.

In some ways these debates have taken the recovery from one of our greatest financial disasters for granted. Economic indicators early this year showed signs of promise. In March an earthquake pushed Japan- the world’s third largest economy- back into a recession. That disaster as well as conflict in the Middle East made it easy to dismiss a poor jobs report in May as having been outside our control. Today, however, new unemployment figures from the Labor Department confirm to us the harsh reality that our economic recovery is in peril. During a month in which economists predicted 125,000 new jobs, only 18,000 ultimately were created. That is less than the growth in population, and actually resulted in an increase in the unemployment rate. No matter what the cause this report cannot go ignored.

The austerity measures taken by state and local governments are influential in this decline. While private sector employment largely held steady, a combined 39,000 government workers lost their jobs last month- 25,000 of those from state and local governments. Adjusted for seasonal fluctuations, almost 18,000 educational services jobs- a sector heavily influenced by government spending- were lost in June. Looking back, over the last two years state and local austerity measures have cost this country almost one million jobs. These losses have a ripple effect across our economy, increasing the strain on social programs and driving down consumer spending. They leave our nation’s classrooms without the teachers they need and set back our long term success. These governments would keep their police officers, fire fighters, and teachers if they were able to, but our representatives in Congress have so far declined to even consider extending them the aid that this would require.

Certainly our national debt is a serious problem, and one that will have to be addressed. When this debate began, before we knew how much the recovery would slow, talks of reducing the deficit made more sense. Now it’s clear that this action would be like pouring gasoline on a fire. Economists ranging from Paul Krugman to former advisers to President Reagan agree that reckless cuts to government spending would only further depress job growth, with a double-dip recession becoming a serious possibility. The new unemployment figures simply emphasise the seriousness of this threat, and they demand our attention.

I campaigned on a promise to bring change to Washington D.C. and to this country. Millions of people came to support the idea that this nation had been dragged down by the relentless partisanship promoted by politicians who would rather charm and deceive than tell the truth and work to solve real problems. In the years since that change swept me into office it’s been made clear that the old strategy of dividing the American people for political gain is still alive and well and more resilient than I had imagined. It’s this old way of doing things that has given us the false choice today between bad and worse; higher unemployment, or a default on the part of the U.S. government.

It’s easy and tempting to simplify issues like this. But despite the simple common sense wisdom politicians try to sell, running the budget for the entire United States of America isn’t like balancing your family’s checkbook. I’ve never met a family of four that issues 1, 10, and 30 year treasury bonds, or that employs nearly 3 million people. Governments must take into consideration time frames that look past whole generations and issues which affect children not even born yet. Economists have developed comprehensive theories of how governments can stimulate economies through their budgets, and they tell us that it’s increases in spending which lead to speedy recoveries, not decreases. It was spending that ultimately got us out of the Great Depression, and as unpleasant as it was, government spending intervened in this financial crisis to prevent a full blown worldwide collapse.

It’s a tragic fate that when we need it the most government stimulus is least affordable. However, it is the hand we’ve been dealt, and the unpleasantness of our situation doesn’t excuse us from the laws of economics. Our debt, though high, is not unprecedented, and our country has seen its way through problems greater than this. My administration has added to our debt and I stand behind those decisions. I simply cannot look at all of the facts available to me and conclude that the largest problem we face as a nation is our government spending and not our sluggish economy. If I’m forced to make a choice, I choose families over balance sheets. That’s why I promise today that I will refuse to sign any bill that comes to my desk which the Congressional Budget Office suggests will cost the United States jobs over the next five years. If that means I am going against public sentiment and limiting myself to one term in office, so be it. I would rather be remembered as the one term president who tried saving this country from a second recession than as a two term failure who succumbed to the forces he campaigned to change.

I believe there are ways of cutting spending that wouldn’t jeopardize near-term job growth, and that we have a rare opportunity today to reform some of the things that are wrong with government. I truly think that together we can find some answers to partially satisfy each party’s goals. For example, reports show that by closing tax loopholes and using some of the money to pay for temporary cuts to the payroll taxes, we can actually lower the deficit and wind up with an increase in jobs. When each party allows itself to move past its most zealot supporters and think a little differently, creative solutions like this become possible.

There’s a wide, rich middle ground in America waiting to be acknowledged by politicians. Let’s remember that outside of the very vocal twenty percent that each party has claimed as their “base” there is a country full of people who work hard to provide for their families, and who shake their heads when they hear politicians feuding rather than working hard themselves. During a different debate in a different time in this nation’s history, an American President warned us that “a house divided against itself cannot stand.” Let’s not forget the tragic lesson this country learned. We need to put an end to this never-ending pursuit of the campaign, and go to one another when we have a disagreement, rather than to TV cameras. We need to move past the idea that every piece of news is an opportunity to pull out our 2012 scorecards. Above all, we need to become serious about the problems that face the country today.

With the economy as fragile as it is, reducing government spending by $2 or $3 trillion would almost certainly fail to decrease the deficit by a similar amount. The higher unemployment rate that would likely accompany the cuts would lead to more people applying to government social programs. A potential second recession would devalue government holdings, increase out of pocket costs for pension programs, and could even push some states over the brink, forcing the Federal government to assume their debt. This, of course, all pales in comparison to the costs related to not raising the federal debt ceiling. Let us make no mistake: if the United States were to default on its obligations it would mean a worldwide market failure that would potentially rival the one we faced in 2008. Neither this nor the possibility of a contracting economy are acceptable options. So where does that leave us?

I believe there is a middle path available which doesn’t take either party’s goals as sacrosanct. One which can prevent market panic, avoid slowing down employment growth over the next five years, and still reduce deficits in the long term. This will require our leaders to be honest with one another, and with the American people. While there may be unpopular decisions that must be made, it is my true belief that whether they campaigned on a promise of debt reduction, one of job creation, or even of “Change We Can Believe In,” they will be the decisions that voters sent them here to make. I am confident that this is attainable, and that this great nation will endure as it has endured. It will revive, and will prosper. Thank you, and God bless America.


  1. I've often wandered why no one suggests changes to our trade agreements or restrictions on companies who take their workforce overseas as a way to address unemployment.
    Anyway, email this to his speechwriter. It might get read.
    Thanks for summing it up so well.

  2. I can't remember the last time I heard someone restricting trade. There's a good reason for that- if we raise tariffs against a country, they will raise them for us. It's a mutually assured destruction sort of idea. But there are some countries (China comes to mind) that are manipulating their currency exchange rates so that in effect they ARE restricting trade. It's possible that it's time for us to hold up our end of the "mutual" bargain with these countries.

    It's certainly worth studying. Even if tariffs raised the Consumer Price Index by 15%, if the median wage were to rise by 20% because of increased manufacturing it would be worth it. We need data to base policy on.

    Thanks for the kind words- maybe I'll track down the email for one of Obama's deputy communication directors :) Hope to hear more from you!

  3. Not a single second surrendered relinquishing me in total stun.
    Joseph Hayon