Racing to reverse the country’s economic spiral, President Barack Obama signed the mammoth stimulus package into law Feb. 17 and readied a new $50 billion foreclosure rescue for legions of Americans who are in danger of losing their homes.
There was no recovery yet for beleaguered automakers, who were back in Washington for more bailout billions. General Motors Corp. said it was closing plants, Chrysler LLC said it was cutting vehicle models and both said they were getting rid of thousands more jobs as they made their restructuring cases for $5 billion more for Chrysler and as much as $16.6 billion more for GM. The United Auto Workers union said it had agreed to tentative concessions that could help Detroit’s struggling Big Three.
Anything but reassured, Wall Street dove ever lower. The Dow Jones industrials fell 297.81 points, closing less than a point above their lowest level in five and a half years. Obama focused on the $787 billion stimulus plan, an ambitious package of federal spending and tax cuts designed to revive the economy and save millions of jobs. Most wage-earners will soon see the first paycheck evidence of tax breaks that will total $400 for individuals and $800 for couples.
The stimulus package was a huge victory for Obama less than one month into his presidency. But he struck a sober tone and lowered expectations for an immediate turnaround in the severe recession that is well into its second year. ‘None of this will be easy,’ he said. ‘The road to recovery will not be straight. We will make progress, and there may be some slippage along the way.’ Still, he declared, ‘We have begun the essential work of keeping the American dream alive in our time.’
Underscoring energy-related investments in the new law, Obama and Vice President Joe Biden traveled to Denver where the president signed it at the Denver Museum of Nature & Science before roughly 250 people including alternative energy business leaders. Earlier, the pair examined solar panels on the museum’s roof.
On Feb. 18, Obama will outline another big piece of his recovery effort – a $50 billion plan to help stem foreclosures – in Arizona, one of the states hardest hit by the mortgage defaults that are at the center of the nation’s economic woes.
Treasury Secretary Timothy Geithner mentioned the housing program last week as he rolled out a wide-ranging financial-sector rescue plan that could send $2 trillion coursing through the financial system. Obama is expected to detail how the administration plans to prod the mortgage industry to do more in modifying the terms of home loans so borrowers have lower monthly payments.
One Democratic official familiar with the plans said they will provide a government subsidy so mortgage companies can rework problem loans and thus make them more affordable for borrowers. Another part will allow homeowners to refinance their mortgages if they owe more than their homes are valued. Still another section would give bankruptcy judges more authority to change mortgages.
The official, who spoke on the condition of anonymity to avoid pre-empting the president, said the Obama administration also will use Fannie Mae and Freddie Mac to help prevent borrowers from defaulting on their mortgages, and create national standards for loan modifications.
More than 2.3 million homeowners coast-to-coast faced foreclosure proceedings last year, an 81 percent increase from 2007. Analysts say that number could soar as high as 10 million in the coming years, depending on the severity of the recession. In Denver, Obama said the stimulus package had received broad support in Washington and elsewhere, though Democrats pushed it to passage with only three Republican votes in the Senate and none in the House.
One of the biggest public spending programs since World War II, the new law is designed to create jobs in the short term and to boost consumer confidence to battle the worst economic crisis since the Great Depression. It also makes down payments on Obama’s health care, energy and education goals.
Taking the long view, Obama cast the law as just ‘the beginnings of the first steps’ to jerk the country out of a crisis he inherited from GOP President George W. Bush. White House press secretary Robert Gibbs, asked by reporters, would not rule out another stimulus in the future, though he said a sequel was not in the works ‘at this point.’ He added, ‘The president is going to do whatever he thinks is necessary to get our economy moving again.’
The nation’s distressed economy has dominated Obama’s first weeks in office. While laying the groundwork to address woes in the auto, financial and housing sectors, Obama spent some of his political capital lobbying hard for the stimulus package that the Democratic-controlled Congress approved last week. Obama has essentially pinned his political future on his prescriptions for the ailing economy, going so far as to raise the possibility of a one-term presidency if he fails.
There’s no guarantee that Obama’s enormous marshaling of resources and multi-pronged approach will stunt the economic freefall, much less produce jobs or bring prosperity. The only thing certain is that Obama is on track to boost a federal debt that stands at $10.7 trillion.
Clearly mindful of that, Obama said: ‘We will need to do everything in the short term to get our economy moving again’ as well as ‘begin restoring fiscal discipline and taming our exploding deficits over the long term.’
As he spoke in Denver, General Motors Corp. and Chrysler LLC were racing to complete plans detailing how they would repay government loans and restructure their operations to remain viable. Detroit’s third major automaker, Ford Motor Co., has not requested government help.
GM submitted a dire plan to the Treasury Department, saying it would try to borrow up to $16.6 billion more from the government on top of the $13.4 billion it has received. The plan includes cutting 47,000 more jobs and closing five more U.S. factories. Chrysler said it needed $5 billion more to survive on top of the $4 billion in government loans it received in December. It said it would cut 3,000 jobs and three vehicle models as part of its restructuring plan.
The United Auto Workers union said it had reached a tentative deal with Chrysler, GM and Ford to modify its contracts with the automakers to help them endure. As a White House task force prepared to oversee the companies’ restructuring, presidential spokesman Gibbs said the administration had not closed the door to a government-backed bankruptcy for the companies.
GM said it had considered bankruptcy, but the only credit available to finance a reorganization would be from the government and that could cost as much as $100 billion.
As for the stimulus plan, Obama contends it will create or save 3.5 million jobs. Critics, mostly Republicans, contend it is filled with wasteful spending and provisions that won’t boost the economy.