TOPICS > Economy

Shrinking GDP, Obama Task Force Cap Week’s Economic News

January 30, 2009 at 6:00 PM EST
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There was more evidence Friday the recession is getting worse, a fact that President Obama and his economic team continued to confront. Columnists Mark Shields and David Brooks mull Mr. Obama's approach.
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JUDY WOODRUFF: The Commerce Department numbers out today showed the gross domestic product shrank at an annual rate of 3.8 percent from October through December. That drop marked the weakest performance since 1982, when the country was in a severe recession, but it wasn’t as deep as many economists expected.

Still, with more revisions to come from Commerce, it’s widely believed that the final numbers will be worse yet.

And in a statement today, the President’s Council of Economic Advisers said it’s clear that the problems that began in the housing and financial sectors have now spread to nearly all areas of the economy.

At the White House, President Obama himself seized on the figures.

BARACK OBAMA, President of the United States: That’s the worst contraction in close to three decades. This isn’t just an economic concept; this is a continuing disaster for America’s working families.

As worrying as these numbers are, it’s what they mean for the American people that really matters and that’s so alarming: families making fewer purchases; businesses making fewer investments; employers sustaining fewer jobs.

The recession is deepening, and the urgency of our economic crisis is growing. Yesterday, we reached a new threshold: the highest number of Americans receiving unemployment benefits on record. Every day it seems there’s another round of layoffs, another round of jobs lost and families’ lives turned upside down.

Thousands of layoffs

Vice President Joe Biden
There are some people who say that we've entered an age when only a few people can prosper and everyone else has to fall behind. We do not accept that proposition.

JUDY WOODRUFF: And the layoffs kept on coming today. Caterpillar, the heavy equipment maker, announced 2,100 new job cuts at three plants in Illinois. That was on top of 20,000 cuts announced earlier this week.

And there was more from abroad. The Japanese electronics giant NEC announced it is cutting 20,000 jobs worldwide.

And Honda reported its earnings in the last quarter dropped 90 percent.

The weight of all those numbers dragged Wall Street down to its worst January ever. The Dow Jones Industrial Average lost 148 points today, to close at 8,000 even. It fell almost 9 percent for the month. The Nasdaq dropped 31 points today to close at 1,476, off nearly 6.5 percent in January.

The deepening economic crisis led the Obama administration today to create what they're calling a task force on the middle class. Vice President Joe Biden will lead it.

JOSEPH BIDEN, Vice President of the United States: For too many years, we've had a White House that has failed to put the American middle class at the front and center of our economic policies.

And even when our economy, even when our economy was growing, there was a -- and it was very solid ground on which to build, the middle class found itself slipping.

There are some people who say that we've entered an age when only a few people can prosper and everyone else has to fall behind. We do not accept that proposition.

There has never been -- and that has never, ever been a part of America's story at any part in our history. And the president and I are determined that it will not be any part of America's story today.

JUDY WOODRUFF: To reinforce that point, the president welcomed labor union leaders to the White House to watch him sign three executive orders, all reversing Bush administration policies that unions said had weakened organized labor.

The president still faces a major test on Monday, when the Senate takes up the economic stimulus package. It was clear today he has yet to win over a number of Republicans.

SEN. JEFF SESSIONS (R), Alabama: I know that the conventional wisdom is we've just got to do something. If we don't do something, people will be mad at us. If we don't do something and the economy gets worse, they'll say, "You didn't do anything, you stupid goof. You sat on the sideline and didn't do anything."

But I've got to say, at some point, you can do too much, and you can do things that are unwise. And that's we're paid to decide here. So I am committed and will do what I can do to defeat the bill as written.

JUDY WOODRUFF: The House version of the measure passed this week with no Republican support. Democrats still aim to get a final bill to the president by mid-February.

Obama faces first tests

David Brooks
The New York Times
[T]he actual substance of the package makes it impossible for a lot of conservatives or all conservatives to be for it and very hard for anybody in the center to be for it.

JIM LEHRER: And to Shields and Brooks, syndicated columnist Mark Shields, New York Times columnist David Brooks.

David, in general, how well do you believe the new president is doing, coping with all this bad economic news that comes day after day after day?

DAVID BROOKS, Columnist, New York Times: I guess I can't give him more than a B. I mean, I feel like he stole my honeymoon.

I wanted a period where he could take the left and the center and parts of the right of this country and unify them behind a stimulus package. But the actual substance of the package makes it impossible for a lot of conservatives or all conservatives to be for it and very hard for anybody in the center to be for it.

Because basically what they've done -- and I don't think this is him. I think this is mostly, frankly, the Democrats on Capitol Hill -- is they've taken a clean stimulus package, which was just about stuff that would happen short term that would address this emergency and they've married it to a long-term agenda, quite a liberal agenda and quite a sprawling agenda which to me is without form.

And that's made it -- I understand why they did it, because they could pay for their long-term agenda just with debt, with stimulus debt. They didn't have to account for actually funding the stuff.

But it's made it very hard for almost all Republicans and even a lot of moderate Democrats to get enthusiastic or even support this. And I think he's blown an opportunity to really build a bipartisan...

JIM LEHRER: Blown an opportunity, Mark?

MARK SHIELDS, Syndicated Columnist: I don't think so, Jim. I think he obviously passed the first test this week. David has expressed his opposition and objections to it forcefully.

He basically kept all the Democrats on board, except for a few in Blue Dog districts that are vulnerable and who, I think, would have been there if he had needed them.

I think, quite honestly, in a political sense, he's been the dominant figure. He has put the Republican Party in a terrible position, not simply at a time when the people in the country want action.

There's a failure, as you saw in Judy's report, of demand in the country. This would pump considerable demand into the economy and stimulate activity.

I understand David's objections to it. These are all items which Barack Obama had embraced, had endorsed. There's nothing that was a sleeper in this. And I guess the thing...

Objections to certain funding

Mark Shields
Syndicated Columnist
There was an understandable objection of $200 million for family planning. He personally called Henry Waxman, the chairman of the committee from California, asked him to drop it. He did drop it.

JIM LEHRER: You mean in the stimulus package that passed?

MARK SHIELDS: In the stimulus package.

JIM LEHRER: OK.

MARK SHIELDS: These are not -- I mean, certainly no one is opposing extending unemployment benefits to those who expired on the 31st of December. I mean, these are -- the president spoke about family items there.

He did go to certain objections to it. There was an understandable objection of $200 million for family planning. He personally called Henry Waxman, the chairman of the committee from California, asked him to drop it. He did drop it. There was objection about the money on the mall. They dropped that.

And scored by the CBO, it would pump $30 billion...

JIM LEHRER: Congressional Budget Office.

MARK SHIELDS: I'm sorry, Congressional Budget Office, it would pump it in. Like I say, he's a master political leader.

The Republican Party, 1984, Jeane Kirkpatrick, the late Jeane Kirkpatrick, did a brilliant thing. She called the Democrats the "San Francisco Democrats." And they became sort of the sister boom-boom of cultural outside. The president was criticized by many commentators, mentioning Rush Limbaugh, who said, "I hope"...

JIM LEHRER: You're talking about President Obama now.

MARK SHIELDS: President Obama was, by saying, "I hope that he fails. I hope that Barack Obama, President Obama fails." And what he has done is implicitly made Rush Limbaugh the face of the Republican Party.

And I think, in that sense, he's shown himself politically to be masterful as they head into the Senate. And I think you'll see it come back -- and I think you will see Republicans voting for it in its final form.

Programs in the stimulus package

David Brooks
The New York Times
[H]e's taken all these programs, which are permanent programs, which take a long time to plan, and he's put it into stimulus, which means we don't really have money to spend for it and we have to rush the implementation.

JIM LEHRER: Do you see it as hurting the Republicans? First of all, it's very rare to have a unanimous vote, one party on each side. It just doesn't happen. What happened...

DAVID BROOKS: It's especially rare since every single Republican wants to vote for a stimulus. None of them want to vote against this.

But the question -- it will hurt or help depending on if it works. And my problem is, by combining the stimulus with a long-term wish list, he's done two things.

He's weakened the strength of the stimulus, so you've got $290 billion that won't kick in to 2011 that could be devoted right now if they cut the payroll tax, say.

And the second thing, he's taken all these programs, which are permanent programs, which take a long time to plan, and he's put it into stimulus, which means we don't really have money to spend for it and we have to rush the implementation.

The policy I care most about is pre-K education. It's now in there. I'm hoping somehow it falls out, because I do not want them to rush a slap-dash Head Start program into this program where you have to use-it-or-lose-it spending. And then they create the shambolic Head Start expansion which will discredit the whole idea.

JIM LEHRER: But back quickly, we want to move on here, Mark. If it does, in fact, pass as it did the House and it does the Senate, and the president signs it, does it then become a Democratic Obama stimulus plan? And then if it's successful, it's theirs, if it fails, it's theirs?

MARK SHIELDS: He will own the economy. There's no doubt about it, Jim. I mean, but -- as of now, I mean, we just heard Judy's report. The last quarter was the worst growth -- of George Bush's presidency, was the worst record since 1982.

So, I mean, people understand that they -- that Barack Obama has inherited a terrible mess. I mean, the problem for the Republicans is they want him to succeed because they want the nation to succeed. And that has not been the case with Bill Clinton; it wasn't the case with George W. Bush. They understand the desperateness of our situation.

JIM LEHRER: You agree that it's that clear, though, that if it goes this way...

DAVID BROOKS: There's still a possibility in the Senate they'll change it and they'll get some Republicans.

JIM LEHRER: And there could be some bipartisanship?

DAVID BROOKS: Right.

MARK SHIELDS: There will be. There will be Republicans who vote for it in the Senate.

JIM LEHRER: All right.