Financial Regulatory Forum

Obama pushes jobs, vows to fight on after tough year

By Reuters Staff
January 28, 2010

By Caren Bohan and Ross Colvin

WASHINGTON, Jan 28 (Reuters) – U.S. President Barack Obama pushed job creation to the top of his agenda and vowed not to abandon his struggling healthcare overhaul after a political setback that raised doubts about his leadership.

With the economy still weak and unemployment at a painful 10 percent, “Jobs must be our number one focus in 2010,” Obama told Congress in his annual State of the Union address on Wednesday.

Obama, who inherited a financial crisis and wars in Iraq and Afghanistan from the Bush administration, admitted he had made mistakes and that his first year in office had been a difficult one.

But he promised not to give up in his efforts to change the way that Washington works and push through his ambitious agenda for financial reforms, healthcare, energy and climate change, even though many Democrats fear losing their seats in November congressional elections.

“We don’t quit. I don’t quit,” he told Congress, split largely along Republican and Democratic lines over Obama’s policies. “Let’s seize this moment — to start anew, to carry the dream forward and to strengthen our union once more.”

He pledged tough new rules for Wall Street but said he was “not interested in punishing banks,” comments that helped boost U.S. stock futures by appearing to retreat slightly from some of his fiery rhetoric.

Global equities rallied on Obama’s focus on job creation instead of any concrete details of banking reforms that have rattled financial markets.

Obama said he would work to dig the United States out of a “massive fiscal hole” and was willing to use his veto power to enforce budgetary discipline.

The U.S. deficit — a record $1.4 trillion in 2009 or almost 10 percent of gross domestic product — is forecast by the Congressional Budget Office to fall slightly this year to $1.35 trillion.

“THE DEVIL IS IN THE DETAIL”

Obama vowed to double exports in five years to help create jobs, which weighed on the dollar and prompted some in the market to think the government may seek a weaker U.S. currency. Others said there was little substance to his promise to boost jobs and exports.

“The devil is in the detail,” said Andrew Neale, portfolio manager at Fogel Neale Wealth Management in New York. “Making a speech and getting things done are two very different things.”

Pascal Lamy, head of the World Trade Organisation, said Obama’s comments about increasing trade and doubling exports to stimulate the U.S. economy go “in the right direction.”

Still smarting from a drop in his popularity and the loss by his Democrats of a pivotal Senate seat in Massachusetts, Obama did not gloss over his political difficulties.

But his tone at times was feisty and defiant. He recognized that creating jobs is his most pressing task but did not concede the defeat of his sweeping agenda.

The loss in Massachusetts was seen by some political analysts as a referendum on Obama’s policies, reflecting voter anxiety about the healthcare reform effort but also frustration with the punishing double-digit unemployment rate.

“People are out of work. They are hurting. They need our help,” Obama said. “And I want a jobs bill on my desk without delay.”

BUDGET CHALLENGES

Huge deficits have also hurt Obama’s standing. Republicans paint him as a “big spender” and characterize the healthcare bill as a government intrusion into the economy.

To counter the criticism on spending, Obama proposed a three-year freeze on some domestic programs to take aim at soaring budget deficits. He also called for the creation of a bipartisan commission to tackle long-term budget challenges.

“If we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing and jeopardize our recovery,” Obama said.

His former rival for the presidency, Republican Senator John McCain, said he was “disappointed.”

“It was disingenuous for him to talk about spending freezes in 2010 when he wants a ‘jobs bill’ that could be anywhere from $80 billion to $115 billion,” McCain told Reuters.

Many viewers in a CNN poll also seemed unconvinced, with a global survey of 200,000 Twitter messages showing 43 percent had positive reactions to the speech and 39 percent negative.

Obama’s healthcare reform legislation faces possible failure now that Democrats no longer hold a “supermajority” of 60 Senate votes to overcome Republican procedural hurdles.

The climate legislation has stalled and even some of its supporters believe it may be sidelined this year.

Obama insisted he was not giving up on healthcare reform.

“By the time I’m finished speaking tonight, more Americans will have lost their health insurance. Millions will lose it this year,” he said. “I will not walk away from these Americans. And neither should the people in this chamber.”

“BAD BEHAVIOR”

Obama criticized “bad behavior” and recklessness on Wall Street and demanded that Congress pass robust legislation on financial regulation. He promised to push back against financial industry lobbyists who are seeking to water down or kill the proposed legislation.

“We cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back,” Obama said.

The unexpected Democratic setback in Massachusetts, one of the country’s most liberal states, followed defeats for the party in governors races last year in Virginia and New Jersey.

Many Democratic lawmakers fear those races could be a harbinger of crushing losses in November’s elections.

That has prompted Obama to move toward the political center with a focus on themes such as deficit reduction. But he highlighted improvements, noting the economy was shedding hundreds of thousands of jobs each month when he took office.

“After two years of recession, the economy is growing again,” Obama said. (Additional reporting by Alister Bull, Jeff Mason and Matt Spetalnick, editing by Simon Denyer and John O’Callaghan) ((caren.bohan@thomsonreuters.com; +1 202 898 8300; Reuters Messaging: caren.bohan.reuters.com@reuters.net))

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