Friday, June 8, 2012

Clash of spending measures affects the 'austerity' debate

Updated at 3:04 pm ET Two thirds of the way through the current fiscal year, federal spending is a bit higher -- 1.2 percent higher to be exact -- than it was for the same period last year, the Congressional Budget Office reported Thursday.
But wasn’t it just one week ago that the Commerce Department’s Bureau of Economic Analysis -- the scorekeeper for gross domestic product figures -- reported that federal spending was down 5.9 percent in the first quarter of the year? Can both reports be right? Yes, both numbers are accurate, but the agencies’ different accounting methods lead to the clashing estimates.
This clash of numbers matters for the ongoing election year debate over “austerity.”

Carolyn Kaster / AP
President Barack Obama talks about the economy, Friday, June 8, 2012, in the briefing room of the White House.
At his press conference Friday, President Barack Obama called for a new burst of federal spending to help state and local government retain and hire public school teachers, firefighters, and other public sector workers and warned against reducing government spending too quickly in the short term.
Both in Europe and in the United States, he said, "If you are engaging in too much austerity too quickly” then that makes it harder for governments and individuals “to pay off their debts."
For Obama and the Democrats, “austerity” has become the mantra; trying to convince voters that leaner federal spending isn’t what the economy needs now because the government is already -- or is about to be -- in austerity.
One piece of evidence that austerity isn’t yet in effect: federal spending so far in the current fiscal year is about one-third higher than it was at the same point in 2007 -- the last pre-recession year.
When Federal Reserve chairman Ben Bernanke testified Thursday to the congressional Joint Economic Committee, he was prodded by Rep. Maurice Hinchey, D-N.Y., to agree that -- in Hinchey’s words, “Europe has clearly proven that austerity was the wrong policy to pursue” -- and that the United States ought to not follow that path.

President Obama takes questions from reporters at a White House press conference Friday.
To figure out whether the United States is now in -- or about to enter into -- austerity, it helps to know how the BEA’s accounting methods differ from the CBO’s.
Here are some of the differences:
  •  CBO is reporting its figures in current dollars -- which is the way we normally think of dollars in our everyday spending. CBO does not adjust the figures for inflation, the depreciation in the purchasing power of the dollar over time. But when BEA reports on gross domestic product, it is using inflation-adjusted dollars. In other words, it is reporting what economists call “real” spending, accounting for changes in the dollar’s value and also accounting for quality changes in the products being purchased. So if an F-35 fighter that the Defense Department buys this year is more technologically capable than a prior version, which will result in a decline in prices, all else being equal.
  • As the BEA explains on its blog, “the timing of expenditures recorded in gross domestic product is intended to align with when the economic activity takes place.” That means that, for example, if the Defense Department pays Lockheed Martin $16 million in this quarter for a F-22 fighter as it is being built, and then another $16 million next quarter for that fighter, etc., BEA does not record the money as an expenditure until the Defense Department takes delivery of that particular plane. But CBO is reporting outlays shortly after they are being made.
  • Timing: In its reporting on gross domestic product, the BEA is measuring quarter-to-quarter changes during the calendar year. So the reported 5.9 percent drop in the first quarter of this year is a decline from the last quarter of 2011. In contrast, the CBO reports on each month in the federal government’s fiscal year which begins on Oct. 1 and ends on Sept. 30.
  • CBO’s spending report includes what economists call “transfer payments” by the government to individuals– such as Social Security benefits. When the BEA report on gross domestic product came out last week, some news reports cited the figure that said real federal government spending decreased 5.9 percent in the first quarter, but under the BEA’s rules that figure did not include such transfer payments.
One reason why Obama referred throughout his Friday press conference to employment by state and local government: that’s where one can see some evidence of austerity.
Local government employment is down 2.8 percent since the recession started in December of 2007, according to data from the Bureau of Labor Statistics. State government employment is down about 1.3 percent. (But federal government headcount is up by about 2.3 percent since the recession began.)
When adjusted for inflation, compensation paid at all levels of government to public-sector workers was down slightly (one-half of one percent) in the first quarter of this year, compared to 2011 levels, according to the BEA.
And those figures are a reminder that to get a full measure of government spending one must look at all levels of government: federal, state and local.
According to the International Monetary Fund, which has its own accounting rules to compare government outlays among countries, government expenditures in the United States at all levels of government in 2012 will amount to 40 percent of GDP.

Data source: International Monetary Fund
That is down from 2011 when it was 41.4 percent and down from the most recent peak year (2009) when government spending reached 44 percent of GDP
But in the last “normal” or economically healthy year -- 2007 -- government spending was only 36.7 percent of GDP.
In a recession, government spending grows as a percentage of GDP due to higher outlays on unemployment benefits and Medicaid -- and partly because the non-government sectors of economy are not growing, so government outlays make up a bigger part of the total.
  • Government outlays in the United States put it in the same league with countries such as 
  • Canada (41.7 percent of GDP) 
  • Japan (41.1 percent of GDP) and 
  • Brazil (38.6 percent of GDP).
  • But government spending is smaller here than in places such as 
  • France (55.8  percent of GDP) or 
  • Denmark (56.8 percent of GDP.)
Of course, spending in one year alone -- or over a stretch of five years -- does not tell the story of future liabilities.
In its long-term forecast this week the CBO warned -- as did Bernanke in his testimony Thursday -- that the federal government’s fiscal course is unsustainable over the next few decades.

Washington, DC
Thursday, June 7, 2012
Federal Reserve Chair Ben Bernanke told Congress that the economy continues growing at a moderate pace, but that lawmakers should tackle the country's debt and fiscal problems to avoid another possible recession. Mr. Bernanke’s testimony to the Joint Economic Committee follows the release of job number for May,which showed the unemployment rate increased to 8.2%, and that May had the fewest number of jobs added for this year.
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and analyze the effectiveness of economic policy.

“The aging of the U.S. population and the rising costs for health care mean that the combination of budget policies that worked in the past cannot be maintained in the future,” the CBO report said.
Deficits and debt will reach “unsustainable levels,” unless Congress and the president find ways to “increase revenues substantially” and “decrease spending significantly” from projected levels.
The original version of this story said if an F-35 fighter that the Defense Department buys is more technologically capable than a prior version, it will result in a decline in real spending. In fact it would cause a decline in price, but an increase in real spending.

Income Based Repayment: Everything You Need to Know

Over the past several years, the Obama Administration has worked to improve repayment options available to responsible student loan borrowers. Since 2009, former students have been able to enroll in an “Income Based Repayment” (IBR) plan to cap their student loan payments at 15 percent of their current discretionary income if they make their payments on time.
In 2010, President Obama signed into law an improved income-based repayment plan that would lower this cap to 10 percent of discretionary income for students who take out loans after July 1, 2014. Then, last October, the President announced an executive action to make that lower cap available to more borrowers by the end of 2012, rather than 2014. The latest change will likely reduce monthly student loan payments for more than 1.6 million responsible student borrowers.
Despite these opportunities and policy improvements to help graduates make their monthly payments, too few responsible borrowers are aware of their repayment options.  Even among borrowers who understand their options, many have difficulties navigating and completing the application process.
Today, President Obama is introducing a Presidential Memorandum that will help educate more students about their loan repayment options and streamline the IBR application process. Read through the questions below to learn more about income based repayment and how these changes might affect you.

1. What is income-based loan repayment?

Income-Based Repayment (IBR) is a repayment plan that caps your required monthly payments on the major types of federal student loans at an amount intended to be affordable based on income and family size. All Stafford, Grad PLUS, and Consolidation Loans made under either the Direct Loan or Federal Family Education Loan programs are eligible to be included in the program. Non-federal loans, loans currently in default, and Parent PLUS Loans are not eligible for the income-based repayment plan.
The program lowers monthly payments for borrowers who have high loan debt and modest incomes, but it may increase the length of the loan repayment period, accruing more interest over the life of the loan.

2. Who qualifies for IBR?

IBR helps people whose federal student loan debt is high relative to income and family size. Currently, your loan servicer (the company you make your loan payments to) determines your eligibility, but starting in September 2012, students won’t have to contact their loan servicer to apply—they will be able to apply directly through the Department of Education’s website, thanks to a new directive from President Obama.
You can use the U.S. Department of Education’s IBR calculator to estimate whether you are likely to qualify for the plan. The calculator looks at your income, family size, and state of residence to calculate your IBR monthly payment amount. If that amount is lower than the monthly payment you are paying on your eligible loans under a 10-year standard repayment plan, then you are eligible to repay your loans under IBR.

3. Will my eligibility change if I'm married? What if my spouse also has loans?

If you are married and file a joint federal tax return with your spouse, both your income and your spouse’s income are used to calculate your IBR monthly payment amount.
If you are married and you and your spouse file a joint federal tax return, and if your spouse also has IBR-eligible loans, your spouse’s eligible loan debt is combined with yours when determining whether you are eligible for IBR. If the combined monthly amount you and your spouse would pay under IBR is lower than the combined monthly amount you and your spouse are paying under a 10-year standard repayment plan, you and your spouse are eligible for IBR.

4. How will enrolling in IBR affect my monthly payments compared to the standard repayment plan?

It depends on your income. But, take for example a nurse who is earning $45,000 and has $60,000 in federal student loans. Under the standard repayment plan, her monthly repayment amount is $690. The currently available IBR plan would reduce her payment by $332, to $358.  President Obama’s improved “Pay As You Earn” plan -- reducing the cap from 15 percent to 10 percent -- will reduce her payment by an additional $119, to a more manageable $239 -- a total reduction of $451 a month.

6. How will enrolling in IBR affect my payments over the life of the loan compared to the standard repayment plan?

In general, your payments will increase as your income does, but they will never be more than they would have been under the standard 10-year repayment plan. Although lower monthly payments may be better for some borrowers, lower payments may also mean you make payments for longer and the longer it takes to pay your loans, the more interest you pay compared to the standard repayment plan.

7. Is it possible my payments will be higher under IBR than they would under the standard repayment plan?

IBR will never cause your payments to increase more than they would have been under the standard repayment plan. It is possible, however, that your income and the size of your outstanding loan balance may mean that IBR is not beneficial to you. If your payments would be higher in IBR than they would be in the standard repayment plan, the IBR option will not be available to you.
Also, because a reduced monthly payment in IBR generally extends your repayment period, you may pay more total interest over the life of the loan than you would under other repayment plans.

8. How do I opt in to IBR?

To sign up for IBR, call your loan servicer. The loan servicer is the company that sends you your monthly student loan bills.  If you don’t know who your servicer is or would like more information about your loans, such as the balance and interest rates, you can look it up on To see a list of and contact information for common servicers of student loans held by the US Department of Education, you may visit the Loan Servicer page.

9) What does today’s Presidential Memorandum mean for IBR?

The PM will do three things:

Streamline the IBR application process: The Department of Education, in collaboration with the Treasury Department and Internal Revenue Service, will create a streamlined online application process for IBR that allows student loan borrowers with federally held loans to import their IRS tax return income data directly into the IBR application. This process will allow income information to be seamlessly transmitted so that borrowers can complete the application at one sitting.  Federal direct student loan borrowers will no longer be required to contact their loan servicer as the first step to apply.

Enhance online and mobile resources for loan repayment options and debt management: The Department of Education will create integrated online and mobile resources for students and former students to use in learning about Federal student aid, including an explanation of the various options to cap monthly payments based on income. The Department will also develop and make available to borrowers an online tool to help students make better financial decisions, including understanding their loan debt and its impact on their everyday lives. This tool would incorporate key elements of best practices in financial literacy and link to students’ actual Federal loan data to help them understand their individual circumstances and options for repayment.

Increase awareness of IBR: The Department of Education will instruct Federal direct student loan servicers to make borrowers aware of the option to participate in IBR before a student leaves school and upon entering repayment. The Department of Education will make available for institutions of higher education a model exit counseling module that will enable students to understand their repayment options before leaving school and to choose a repayment plan for their student loans that best meets their needs.

10. How can I find out more?

Visit or call 1-800-4-FED-AID. You can also learn more about other student loan repayment options and find advice on paying loans off more quickly using the Consumer Finance Protection Bureau's Student Debt Repayment Assistant.
To find out about other changes to student loan programs, including President Obama's plan to allow borrowers to consolidate Direct Loans and Federal Family Education Loans, click here.

  • Yesterday, we told you about President Obama’s proposal to cut through the red tape that is preventing many homeowners from refinancing their mortgages and saving hundreds of dollars each month and then asked you to answer a few questions and tell us what you think about this issue.
    Your response was overwhelming.  Nearly 20,000 of you responded in a little over 24 hours, telling us about whether you would benefit from this proposal, what you thought was most compelling about the plan, and sharing any additional questions you may have.  One thing we learned?  Nearly 50% of you hadn’t heard about the plan before, so we need to keep getting the word out.
    Haven’t told us what you think yet?  Visit
    We’re still pouring over the responses, and in the days ahead we look forward to sharing what we’ve read and answering many of the questions you’ve asked.  In the meantime, while we at the White House know why we think this is an important proposal, we wanted to hear from you about how this would make a difference.   Here’s what you said:
    “Listen, people like me aren't looking for a handout.  I've got decent credit and if weren't for the value of my home being significantly less than I owe, I would refinance now.  If I could refinance at the historically low rates, I could do two things 1) Pay off some other debt and 2) buy things I and my family need.  I would hope from a policy level both of these benefits would resonate because reducing personal debt and spurring consumer spending are both very good for this or any other economy.”

    “If I had an extra few hundred dollars each month I'd definitely be spending more and putting that money back into the economy. “

    “Finally I feel like there is a program that will benefit people like my husband and myself - people who pay our bills on time, try to skimp and save rather than run up credit card debt, and have never missed a single mortgage payment in 19 years, but because of lowered home values have been unable to take advantage of lower interest rates - until now. This program should save us almost $600 per month and will have more of an impact on our monthly budget than any previous tax rebate programs combined.”

    “Three houses in my cul-de-sac were foreclosed recently. The owners tried to refinance so they had lower repayments but the banks wouldn't allow it, because of reasons mentioned in this presentation. With this policy in place, our neighbors would still be here and our community would be stronger for it.”

    “My husband and I bought our townhouse in August of 2007, right before the bubble burst. We paid top dollar for a house that's now worth more than $100,000 less than what we paid. We pay our mortgage on time every single month, and we feel that we are being penalized for being responsible. We've considered refinancing, but we don't have the extra cash available to pay for all of the costs and fees associated with doing it. If we were able to refinance, we could save a couple hundred dollars every month that we could then use to replenish our savings, and contribute to the economy. We've always tried to do what's right, but it seems that we're on the losing end of this deal.”

    “Being able to refinance while underwater will keep people in their homes.  This is a huge money saver for entire neighborhoods.  When I was selling a house in Santa Fe my neighbors across the street lost their house.  The bank put it on the market for $140000 instead of the $230000 it was worth.  That dropped my property value by about $10000.  The family moved out and someone broke one of their windows.  That cost me a few thousand more.  Then someone spray painted graffiti on their garage door and there went more value from my home.  There were a couple other houses for sale in the same neighborhood.  We all lost because of that foreclosure.”

    “It is so important for me because we have tried to refinance and 5 yrs ago I bought my house for $340,000 and today I still owe 240,000 but they tell me it's only worth 220,000!  The past five years we paid it down $100,000 and now find out it has no equity and the bank wanted us to bring $25,000 to closing and they could do it!  Seriously?  If I had $25,000 I wouldn't have to refinance! With our property taxes increased we are now paying $2400 per month for a mortgage!  It's getting serious for us because we don't have much of  anything left over from our paychecks anymore and hadn't gotten a raise in three years!  I so hope this plan goes through!”

Everything You Need to Know About President Obama's Blueprint for College Affordability

President Obama at the University of Michigan
President Barack Obama delivers remarks on college affordability while speaking at the football practice field at the University of Michigan's Al Glick Field House in Ann Arbor, Mich., Jan. 27, 2012. (Official White House Photo by Pete Souza)
In the State of the Union, President Obama made a point to talk about two critically important trends when it comes to education.
First, if you look at unemployment rates broken down by education level, you’ll notice something stark: Those without a college diploma are twice as likely to be without a job as those who earned a bachelor’s degree. For those who finished college or received more education still, the unemployment rate is just 4.1 percent—less than half the national average. And even among the employed, those who finished college make twice as much as those who failed to finish high school.
But even as a college degree has become more important than ever, the cost of that diploma has skyrocketed. For the first time, Americans owe more on their student loans than they do on their credit cards. A senior in high school today has seen the cost of full-time attendance at a public university nearly double in her lifetime.
This morning at the University of Michigan in Ann Arbor, the President outlined a Blueprint for making college more affordable.

Reforming student aid

The first step is reforming student aid. The federal government provides a lot of money to college campuses through a system that’s antiquated and in real need of an update. President Obama is proposing changing that system to help colleges focus on three principles:
  1. Setting responsible tuition policy: offering relatively lower net tuition prices and/or restraining tuition growth;
  2. Providing good value to students and families: offering quality education and training that prepares graduates to obtain employment and repay their loans; and
  3. Serving low-income students: enrolling and graduating relatively higher numbers of Pell-eligible students.
Colleges that do the most to provide students with good long-term value will be rewarded with additional dollars to help students attend. Those that don't act responsibly in setting tuition will receive less in terms of federal aid.

Race to the Top for higher education

We’ve seen incredible results from President Obama’s Race to the Top program, which is aimed at spurring systemic reforms that improve primary schools. It’s already helped 19 states better educate 22 million students for less than one percent of total education spending.
Now the president is hoping to create a similar initiative for higher education.
The federal government would provide a $1 billion investment to entice state governments to revamp the structure of state financing for higher education, maintain adequate levels of funding for colleges and universities, and help kids graduate on time.

Establish a First in the World competition

President Obama also wants to create a First in the World competition that would invest $55 million in individual colleges and nonprofits that are working to establish or scale up new programs that boost productivity and enhance quality on campuses. Some schools are already embracing these kinds of innovations—redesigning courses to make better use of technology, for example. But First in the World would create incentives for institutions across the country to follow their example.

Better information for families

Right now, if you’re a high school senior, or the parent of a high school senior, sifting through all the information that’s out there about college costs and financial aid is a nearly-impossible task. President Obama wants to give families new tools to help them make informed decisions about higher education. He’s proposing three new efforts:
  1. The President will create a College Scorecard for all degree-granting institutions to help students choose a college that offers the kind of education they hope to pursue at a price they can afford;
  2.  The Obama administration will require colleges to put together a Financial Aid Shopping Sheet to make it easier for families to compare college financial aid packages.
  3. The President is also proposing to begin collecting earnings and employment information for colleges and universities, so that students can have an even better sense of the life they’ll be able to build once they graduate.

Federal support for affordable education

President Obama has already more than doubled total amount of funding available for Pell Grants and is helping 600,000 veterans go back to school with the Post-9/11 GI Bill, but there are other roles that the federal government can assume when it comes to keeping college affordable.
In the State of the Union, the President called on Congress to keep interest rates low for 7.4 million young people who take advantage of student loans (If Congress doesn't act, the interest rates for subsidized Stafford student loans will increase from 3.4 percent to 6.8 percent on July 1) , make the American Opportunity Tax Credit permanent, and double the number of work-study jobs over the next five years to better assist college students who are working their way through school.

Learn more

President Obama Holds a Press Conference on the Economy

June 08, 2012 | 27:31

President Obama calls on Congress to pass the bipartisan, paid-for ideas that he proposed last year to put construction workers back to work upgrading our roads and bridges, teachers back in the classroom educating our kids and police and firefighters back on the job keeping our communities safe, and addresses the state of the economy, including the situation in Europe, which continues to pose headwinds to our recovery here at home.

The White House
Office of the Press Secretary

Remarks by the President

James S. Brady Press Briefing Room
10:40 A.M. EDT
THE PRESIDENT:  Good morning.  I just want to say a few words about the economy, and then I will take some of your questions.`

Today, we’re fighting back from the deepest economic crisis since the Great Depression.  After losing jobs for 25 months in a row, our businesses have now created jobs for 27 months in a row -- 4.3 million new jobs in all.  The fact is job growth in this recovery has been stronger than in the one following the last recession a decade ago.  But the hole we have to fill is much deeper and the global aftershocks are much greater.  That’s why we've got to keep on pressing with actions that further strengthen the economy.

Right now, one concern is Europe, which faces a threat of renewed recession as countries deal with a financial crisis.  Obviously this matters to us because Europe is our largest economic trading partner.  If there’s less demand for our products in places like Paris or Madrid it could mean less businesses -- or less business for manufacturers in places like Pittsburgh or Milwaukee.

The good news is there is a path out of this challenge.  These decisions are fundamentally in the hands of Europe’s leaders, and fortunately, they understand the seriousness of the situation and the urgent need to act.  I’ve been in frequent contact with them over the past several weeks, and we know that there are specific steps they can take right now to prevent the situation there from getting worse.

In the short term, they’ve got to stabilize their financial system.  And part of that is taking clear action as soon as possible to inject capital into weak banks.  Just as important, leaders can lay out a framework and a vision for a stronger eurozone, including deeper collaboration on budgets and banking policy.  Getting there is going to take some time, but showing the political commitment to share the benefits and responsibilities of a integrated Europe will be a strong step.
With respect to Greece, which has important elections next weekend, we’ve said that it is in everybody’s interest for Greece to remain in the eurozone while respecting its commitments to reform.  We recognize the sacrifices that the Greek people have made, and European leaders understand the need to provide support if the Greek people choose to remain in the eurozone.  But the Greek people also need to recognize that their hardships will likely be worse if they choose to exit from the eurozone.

Over the longer term, even as European countries with large debt burdens carry out necessary fiscal reforms, they’ve also got to promote economic growth and job creation.  As some countries have discovered, it’s a lot harder to rein in deficits and debt if your economy isn’t growing.  So it’s a positive thing that the conversation has moved in that direction, and leaders like Angela Merkel and Francois Hollande are working to put in place a growth agenda alongside responsible fiscal plans.

The bottom line is the solutions to these problems are hard, but there are solutions.  The decisions required are tough, but Europe has the capacity to make them.  And they have America’s support.  Their success is good for us.  And the sooner that they act, and the more decisive and concrete their actions, the sooner people and markets will regain some confidence and the cheaper the costs of cleanup will be down the road.

In the meantime, given the signs of weakness in the world economy, not just in Europe but also some softening in Asia, it's critical that we take the actions we can to strengthen the American economy right now.

Last September, I sent Congress a detailed jobs plan full of the kind of bipartisan ideas that would have put more Americans back to work.  It had broad support from the American people.    It was fully paid for.  If Congress had passed it in full, we’d be on track to have a million more Americans working this year.  The unemployment rate would be lower.  Our economy would be stronger.
Of course, Congress refused to pass this jobs plan in full. They did act on a few parts of the bill -- most significantly the payroll tax cut that’s putting more money in every working person’s paycheck right now.  And I appreciate them taking that action.  But they left most of the jobs plan just sitting there. And in light of the headwinds that we’re facing right now, I urge them to reconsider.  Because there's steps we can take right now to put more people back to work.  They’re not just my ideas; they're not just Democratic ideas -- they’re ideas that independent, nonpartisan economists believe would make a real difference in our economy.

Keep in mind that the private sector has been hiring at a solid pace over the last 27 months.  But one of the biggest weaknesses has been state and local governments, which have laid off 450,000 Americans.  These are teachers and cops and firefighters.  Congress should pass a bill putting them back to work right now, giving help to the states so that those layoffs are not occurring.
In addition, since the housing bubble burst, we’ve got more than a million construction workers out of work.  There’s nothing fiscally responsible about waiting to fix your roof until it caves in.  We've got a lot of deferred maintenance in this country.  We could be putting a lot of people back to work rebuilding our roads, our bridges, some of our schools.  There's work to be done; there are workers to do it.  Let’s put them back to work right now.
The housing market is stabilizing and beginning to come back in many parts of the country.  But there are still millions of responsible homeowners who've done everything right but still struggle to make ends meet.  So, as I talked about just a few weeks ago, let’s pass a bill that gives them a chance to save an average of $3,000 a year by refinancing their mortgage and taking advantage of these historically low rates.  That's something we can do right now.  It would make a difference.

Instead of just talking a good game about job creators, Congress should give the small business owners that actually create most of the new jobs in America a tax break for hiring more workers.

These are ideas that, again, have gotten strong validation from independent, nonpartisan economists.  It would make a difference in our economy.  And there's no excuse for not passing these ideas.  We know they can work.
Now, if Congress decides, despite all that, that they aren’t going to do anything about this simply because it’s an election year, then they should explain to the American people why.  There’s going to be plenty of time to debate our respective plans for the future.  That’s a debate I’m eager to have.  But right now, people in this town should be focused on doing everything we can to keep our recovery going and keeping our country strong.  And that requires some action on the part of Congress.  So I would urge them to take another look at some of the ideas that have already been put forward.

And with that, I'm going to take a couple of questions.  And I'm going to start with Caren Bohan -- who is with Reuters, but as we all know, is about to go get a fancy job with National Journal.  (Laughter.)  And we're very proud of her.  So congratulations to you, Caren.  You get the first crack at me.

Q    Thank you very much, Mr. President.  Could you tell the American people what role the United States is playing in the European debt crisis?  And also, do you think European leaders have a handle on what’s needed to stem the crisis?  And finally, you talked about a number of ideas that you’ve already put forth to shield the American economy.  Do you plan to give a speech or lay out additional ideas now that the crisis is really escalating?
THE PRESIDENT:  Well, a couple of things.  First of all, the situation in Europe is not simply a debt crisis.  You’ve got some countries like Greece that genuinely have spent more than they’re bringing in, and they’ve got problems.  There are other countries that actually were running a surplus and had fairly responsible fiscal policies but had weaknesses similar to what happened here with respect to their housing market or the real estate markets, and that has weakened their financial system.  So there are a bunch of different issues going on in Europe.  It’s not simply a debt crisis.

What is true is, is that the markets getting nervous have started making it much more expensive for them to borrow, and that then gets them on a downward spiral.

We have been in constant contact with Europe over the last  -- European leaders over the last two years, and we have consulted with them both at the head of government and head of state level.  I frequently speak to the leaders not only at formal settings like the G8 but also on the telephone or via videoconference.  And our economic teams have gone over there to consult.

As I said in my opening remarks, the challenges they face are solvable.  Right now, their focus has to be on strengthening their overall banking system -- much in the same way that we did back in 2009 and 2010 -- making a series of decisive actions that give people confidence that the banking system is solid, that capital requirements are being met, that various stresses that may be out there can be absorbed by the system.  And I think that European leaders are in discussions about that and they’re moving in the right direction.

In addition, they’re going to have to look at how do they achieve growth at the same time as they’re carrying out structural reforms that may take two or three or five years to fully accomplish.  So countries like Spain and Italy, for example, have embarked on some smart structural reforms that everybody thinks are necessary -- everything from tax collection to labor markets to a whole host of different issues.  But they've got to have the time and the space for those steps to succeed.  And if they are just cutting and cutting and cutting, and their unemployment rate is going up and up and up, and people are pulling back further from spending money because they're feeling a lot of pressure -- ironically, that can actually make it harder for them to carry out some of these reforms over the long term.

So I think there's discussion now about, in addition to sensible ways to deal with debt and government finances, there's a parallel discussion that's taking place among European leaders to figure out how do we also encourage growth and show some flexibility to allow some of these reforms to really take root.
Now, keep in mind that this obviously can have a potential impact on us because Europe is our largest trading partner.  The good news is, is that a lot of the work we did back in 2009 and 2010 have put our financial system on a much more solid footing. Our insistence of increasing capital requirements for banks means that they can absorb some of the shocks that might come from across the Atlantic.  Folks in the financial sector have been monitoring this carefully and I think are prepared for a range of contingencies.

But even if we weren't directly hit in the sense that our financial system still stayed solid, if Europe goes into a recession that means we're selling fewer goods, fewer services, and that is going to have some impact on the pace of our recovery.  So we want to do everything we can to make sure that we are supportive of what European leaders are talking about.  Ultimately, it is a decision that they've got to make in terms of how they move forward towards more integration, how they move forward in terms of accommodating the needs for both reform and growth.

And the most important thing I think we can do is make sure that we continue to have a strong, robust recovery.  So the steps that I've outlined are the ones that are needed.  We've got a couple of sectors in our economy that are still weak.  Overall, the private sector has been doing a good job creating jobs.  We've seen record profits in the corporate sector.

The big challenge we have in our economy right now is state and local government hiring has been going in the wrong direction.  You've seen teacher layoffs, police officers, cops, firefighters being laid off.  And the other sector that's still weak has been the construction industry.  Those two areas we've directly addressed with our jobs plan.  The problem is that it requires Congress to take action, and we're going to keep pushing them to see if they can move in that direction.

Jackie Calmes.  Where did Jackie go?  There she is.

Q    Thank you, Mr. President.  I'd like to ask you a couple -- about what a couple of other people have said about Europe.  And one is that I'd like to know if you agree with former President Bill Clinton, who said in the past week that the European's policies that you've described here today are much like those of the Republicans in this country -- politics of austerity that would take us in the same direction as Europe -- if you agree with that.  The Republicans, for their part, have said that you're simply blaming the Europeans for problems that have been caused by your own policies.  So I'd like you to respond to both of those.  And also, tell us precisely how much time you personally spend on the European situation.
THE PRESIDENT:  Any other aspects to the question?  (Laughter.)

Q    I do have more questions.  (Laughter.)

Q    Is she going to National Journal?  (Laughter.)

THE PRESIDENT:  First of all, in terms of the amount of time I spend -- look, I think it's fair to say that over the last two years I'm in consistent discussions with European leadership and consistent discussions with my economic team.
This is one of the things that's changed in the world economy over the last two or three decades, is that this is a global economy now, and what happens anywhere in the world can have an impact here in the United States.  Certainly that's true after the kind of trauma that we saw in 2008 and 2009.

And if you think about the situation in Europe, they're going through a lot of the things that we went through back in 2009, 2010, where we took some very decisive action.  The challenge they have is they’ve got 17 governments that have to coordinate -- 27 if you count the entire European Union, not just the eurozone.  So imagine dealing with 17 Congresses instead of just one.  That makes things more challenging.

But what we’ve tried to do is to be constructive, to not frame this as us scolding them or telling them what to do, but to give them advice, in part based on our experiences here in having stabilized a financial situation effectively.  And ultimately, though, they're going to have to make a lot of these decisions, and so what we can do is to prod, advise, suggest.  But ultimately, they're going to have to make these decisions.

Now, in terms of characterizing the situation over there, what is absolutely true -- this is true in Europe and it’s true here in the United States -- is that we’ve got short-term problems and long-term problems.  And the short-term problems are:  How do we put people back to work?  How do we make the economy grow as rapidly as possible?  How do we ensure that the recovery gains momentum?
Because if we do those things, not only is it good for the people who find work, not only is it good for families who are able to pay the bills, but it actually is one of the most important things we can do to reduce deficits and debt.  It’s a lot easier to deal with deficits and debt if you’re growing, because you’re bringing in more revenue and you’re not spending as much because people don't need unemployment insurance as much; they don't need other programs that are providing support to people in need because things are going pretty good.

Now, that's true here in the United States, and that's true in Europe.  So the problem I think President Clinton identified is that if, when an economy is still weak and a recovery is still fragile, that you resort to a strategy of "let’s cut more" -- so that you’re seeing government layoffs, reductions in government spending, severe cutbacks in major investments that help the economy grow over the long term -- if you’re doing all those things at the same time as consumers are pulling back because they're still trying to pay off credit card debt, and there’s generally weak demand in the economy as a whole, then you can get on a downward spiral where everybody is pulling back at the same time.  That weakens demand and that further crimps the desire of companies to hire more people.  And that's the pattern that Europe is in danger of getting into.

Some countries in Europe right now have an unemployment rate of 15, 20 percent.  If you are engaging in too much austerity too quickly, and that unemployment rate goes up to 20 or 25 percent, then that actually makes it harder to then pay off your debts.  And the markets, by the way, respond in -- when they see this kind of downward spiral happening, they start making a calculation, well, if you’re not growing at all, if you’re contracting, you may end up having more trouble paying us off, so we’re going to charge you even more.  Your interest rates will go up.  And it makes it that much tougher.

So I think that -- what we want both for ourselves, but what we’ve advised in Europe as well is a strategy that says let’s do everything can to grow now, even as we lock in a long-term plan to stabilize our debt and our deficits, and start bringing them down in a steady, sensible way.

And by the way, that’s what we proposed last year; that’s what’s proposed in my budget.  What I’ve said is, let’s make long-term spending cuts; let’s initiate long-term reforms; let’s reduce our health care spending; let’s make sure that we’ve got a pathway, a glide-path to fiscal responsibility, but at the same time, let’s not underinvest in the things that we need to do right now to grow.  And that recipe of short-term investments in growth and jobs with a long-term path of fiscal responsibility is the right approach to take for, I think, not only the United States but also for Europe.

Q    What about the Republicans saying that you’re blaming the Europeans for the failures of your own policies?
THE PRESIDENT:  The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last 27 months, over 800,000 just this year alone.  The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government -- oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.

And so, if Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is, how do we help state and local governments and how do we help the construction industry.  Because the recipes that they’re promoting are basically the kinds of policies that would add weakness to the economy, would result in further layoffs, would not provide relief in the housing market, and would result, I think most economists estimate, in lower growth and fewer jobs, not more.

All right.  David Jackson.

Q    Thank you, sir.  There are a couple of books out with, essentially, details about national security issues.  There are reports of terrorist kill lists that you supervise and there are reports of cyber-attacks on the Iranian nuclear program that you ordered.  Two things.  First of all, what’s your reaction of this information getting out in public?  And secondly, what’s your reaction to lawmakers who accuse your team of leaking these details in order to promote your reelection bid?
THE PRESIDENT:  Well, first of all, I’m not going to comment on the details of what are supposed to be classified items.  Second, as Commander-in-Chief, the issues that you have mentioned touch on our national security, touch on critical issues of war and peace, and they're classified for a reason -- because they're sensitive and because the people involved may, in some cases, be in danger if they're carrying out some of these missions.  And when this information, or reports, whether true or false, surface on the front page of newspapers, that makes the job of folks on the front lines tougher and it makes my job tougher -- which is why since I've been in office, my attitude has been zero tolerance for these kinds of leaks and speculation.

Now, we have mechanisms in place where if we can root out folks who have leaked, they will suffer consequences.  In some cases, it's criminal -- these are criminal acts when they release information like this.  And we will conduct thorough investigations, as we have in the past.

The notion that my White House would purposely release classified national security information is offensive.  It's wrong.  And people I think need to have a better sense of how I approach this office and how the people around me here approach this office.

We're dealing with issues that can touch on the safety and security of the American people, our families, or our military personnel, or our allies.  And so we don’t play with that.  And it is a source of consistent frustration, not just for my administration but for previous administrations, when this stuff happens.  And we will continue to let everybody know in government, or after they leave government, that they have certain obligations that they should carry out.

But as I think has been indicated from these articles, whether or not the information they've received is true, the writers of these articles have all stated unequivocally that they didn't come from this White House.  And that's not how we operate.

Q    Are there leak investigations going on now -- is that what you're saying?
THE PRESIDENT:  What I'm saying is, is that we consistently, whenever there is classified information that is put out into the public, we try to find out where that came from.
Okay?  Thank you very much, everybody.  Thank you.

Obama: 'It is absolutely clear that the economy is not doing fine'

Under fire from Republicans, President Obama clarified an earlier assessment of the health of the private sector, explaining that it's "absolutely clear" the economy is not doing "fine."
The president, in response to a question Friday afternoon in the Oval Office, backtracked somewhat on his comments his morning that "the private sector is doing fine."
"It is absolutely clear that the economy is not doing fine. That's why I had a press conference," Obama said.
Obama's original comment drew immediate scrutiny from Republicans; Romney, speaking in Iowa, said the comment showed that Obama was "out of touch."
The president's initial remarks were intended to portray the relative weakness in public sector hiring -- an outgrowth of spending cuts at the federal, state and local level -- versus the private sector. The drop off in public employment has been a drag on the overall employment picture; the economy added just 69,000 jobs last month, a number that was so low, in part, because of anemic public sector hiring.
A variety of Republicans pounced on the comments nonetheless, proclaiming Obama as disconnected from economy, the central issue in this fall's election.
The president used the opportunity to take a shot at Romney and those Republicans.
"You know, and what I'm interested in hearing from Congress and Mr. Romney is what steps are they willing to take right now that are going to make an actual difference?" Obama asked. "And so far, all we've heard are additional tax cuts to the folks who are doing fine, as opposed to taking steps that would actually help deal with the weaknesses in the economy and promote the kind of economic growth that we would all like to see."

President Obama Discusses the State of the Economy

President Barack Obama delivers a statement on the economy in the James S. Brady Press Briefing Room of the White House, June 8, 2012. (Official White House Photo by Lawrence Jackson)

President Obama today took to the podium in the White House Briefing Room to discuss the state of the economy and answer a few questions from reporters.
He began by addressing the ongoing crisis in Europe -- America's largest trading partner -- and why it's an area of focus for his administration.
"If there’s less demand for our products in places like Paris or Madrid," he said, "It could mean less businesses...for manufacturers in places like Pittsburgh or Milwaukee."
The President told reporters that, while there are reasons for concern, European leaders have the capacity to solve their problems -- and they'll have the support of the United States in that effort.
The President also said that the continued instability of the international economy is another reason why lawmakers need to do more to create jobs here at home:
[Since] the housing bubble burst, we’ve got more than a million construction workers out of work. There’s nothing fiscally responsible about waiting to fix your roof until it caves in. We've got a lot of deferred maintenance in this country. We could be putting a lot of people back to work rebuilding our roads, our bridges, some of our schools. There's work to be done; there are workers to do it.  Let’s put them back to work right now.
The housing market is stabilizing and beginning to come back in many parts of the country. But there are still millions of responsible homeowners who've done everything right but still struggle to make ends meet. So, as I talked about just a few weeks ago, let’s pass a bill that gives them a chance to save an average of $3,000 a year by refinancing their mortgage and taking advantage of these historically low rates.  That's something we can do right now. It would make a difference.
Instead of just talking a good game about job creators, Congress should give the small business owners that actually create most of the new jobs in America a tax break for hiring more workers.
These are ideas that, again, have gotten strong validation from independent, nonpartisan economists. It would make a difference in our economy. And there's no excuse for not passing these ideas. We know they can work.

More Good News for Women and Families

Today we got more good news showing the difference the health care law is making in people’s lives. A new report from the Commonwealth Fund found that 6.6 million young adults are getting health coverage on their parents’ plans. And according to new data from Gallup, the percentage of young adults who are uninsured continues to decline, indicating that the law is helping families across the country get better access to health care and more peace of mind.
These and other issues came up when I had the privilege to be part of a town hall meeting to discuss the very important topic of women’s health and how the health care law is making the system fair for women and their families across the country.
Joining me were: senior members of the Administration including Valerie Jarrett, Tina Tchen,  and Cecilia Muñoz, fellow health experts from HHS including Mayra Alvarez and Caya Lewis,  Judy Waxman from the National Women’s Law Center, and a few members of the media including Margarita Bertsos from REDBOOK and Kelly Wallace at iVillage.
During the conversation, we talked about how the health care law, the Affordable Care Act, does more to advance women’s health than any other piece of legislation in the last 50 years.
But what made that point clear were the real stories from women who know firsthand the difference the benefits of the law make.   Many women in the room with us shared their personal stories.
Born with a rare congenital disease, Abby, a 20-year-old student at the University of Minnesota, shared with us her story that because of the Affordable Care Act, she is able to remain on her parents’ health plan until she turns 26. We heard from Robyn, who doesn’t have to worry about lifetime limits on her insurance coverage. And we also heard from Helen who benefits from the free preventive services offered under Medicare.
We talked about how the law is soon requiring insurance companies to cover anyone with pre-existing conditions, which means that women will get the care they need and won’t be charged more for it just because they’re women. And how community health centers, which are supported by the Affordable Care Act, provide critical care for families. We also discussed the fact that some women have skipped preventive care because of cost –   which is why the Affordable Care Act ends copays for recommended preventive services.
Our town hall reiterated one thing: that for women, the law means peace of mind. Peace of mind that no matter their circumstance there will be a health system that works for them and cares about their needs. That’s what the law is all about.
Kathleen Sebelius is the Secretary of Health and Human Services

Where is the Tax Cut to Help Her?

11 Years Ago Today

I got this today from Mr grayson, and he hits the nail on the head.  We can not give the rich any more tax breaks. The congress is off next week, (that is another speech) when they come back, they are going to try and pass the tax extensions for another year.  Thank God, the senate will not pass it and President Obama will veto it. It is a waste of time and money. Why do they not pass the student loan bill, or the transportation bill, or Obama's job bill. Do something that will earn them a paycheck.(that also is another speech). I mean this is the nineth week off since they began in January.  No one else gets that much time off.  This has got to stop, they should be earning their paychecks, just like everybody else. And if they do not do their work, they should not get paid. (i will discuss Congress and what I believe should be their fate in another blog).

Dear Peggy:

As I mentioned on MSNBC last night, today marks 11 years since the Bush tax breaks for the rich were enacted. President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act on June 7, 2001.

Bush claimed (as right-wingers always do) that tax breaks for the rich would create jobs in the private sector. Well, they haven't. There were 110 million private sector jobs in America in 2001. There are 110 million private sector jobs in America today. Despite a population increase of more than 25 million, there are no more private sector jobs today than when the Bush tax breaks for the rich became law.

In the past 11 years, the number of Americans living in poverty has increased from 33 million to 44 million. The number of Americans receiving food stamps has risen from 18 million to 46 million. "Trickle-down" has not even been a trickle.

But what could we expect? We didn't give tax breaks to the poor; we gave tax breaks to the rich. And for the rich, the past 11 years has been one long party. According to the Paris School of Economics, the top 1% in America saw their share of national income increase by more than 13% from 2001 to 2010. The top 0.1% saw their share of income increase by 20%. The top 0.01% saw their share of income explode by more than 37%, from 2.4% of all of the income in America to 3.3%.

The Bush tax breaks for the rich have yielded the most unequal distribution of wealth in American history, more unequal even than that of 1929, just before the Great Depression.

The lurch toward inequality started decades ago; the Bush tax breaks for the rich only accelerated it. According to the nonpartisan Congressional Budget Office, since 1979, income for the top 1% has increased by $700,000 a year, while income for the bottom 90% has declined by $900 a year. Between 1992 and 2007, income for the richest 400 Americans increased by 392%, as their taxes dropped by 37%.

You see where this is going. The end-game of the Bush tax breaks for the rich is the end of the middle class in America. No jobs, no healthcare, no pensions, no home equity, no higher education. The rich get richer, and the poor get poorer.

The Bush tax breaks are due to expire in a few months. We are at a fork in the road.

No more tax breaks for the rich. No. No. No. No.


Alan Grayson

"The rich get richer and the poor get laid off.
In the meantime, in between time,
Ain't we got fun?"

– Van & Schenck, "Ain't We Got Fun" (1921)