Obama pivots to positivity

Turning more upbeat, President Barack Obama said Friday his administration is working to create a “post-bubble” model for solid economic growth once the recession ends. He said that means the days of overheated housing markets and “people maxing out on their credit cards” are over.

But first, Obama said, “We’ve got to get through this difficult period.”

There are “modestly encouraging signs” on that score, said Lawrence Summers, Obama’s top economic adviser, citing indications that consumer spending had stabilized after taking a dive over the holiday season.

The White House’s attempts to be positive matched a fourth day in a row of stock market gains. The Dow Jones industrials gained 53.9 points to cap Wall Street’s best week since November.

Administration officials were criticized earlier this year for painting too dark a picture of the economy in an effort to win congressional passage of the president’s $787 billion stimulus package. But more recently, the president and others on his team have tempered their comments in hopes of building confidence, including the president’s suggestion last week that it was a good time for those with a long-term perspective to buy stocks.

Over the past week, Obama and other top administration officials have fanned out across Washington to publicly discuss the economy, take questions and offer reassurance.

On Monday, Christina Romer, chairwoman of the president’s Council of Economic Advisers, told an audience at the Brookings Institution that the current crisis, while severe, “pales in comparison” with the Great Depression. On Thursday, Obama told the Business Roundtable, an association of executives, that things “are not as bad as we think they are.” And Friday, as Obama met with his economic advisers, Summers told another Brookings crowd that he sees glimmers of hope amid the economic gloom.

“It is surely too early to gauge the broader economic impact of the president’s program,” Summers said. “But it is modestly encouraging that since it began to take shape, consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized.”

Republicans, meanwhile, noted that the administration is selling a sense of hope even as the jobless rate has spiked to 8.1 percent and economic advisers to House Speaker Nancy Pelosi, D-Calif., have warned that another big stimulus package might be needed. “Their newfound optimism is definitely a tactical shift,” said Antonia Ferrier, a spokeswoman for House Minority Leader John Boehner, R-Ohio. “For the sake of American families and small businesses, we hope they are right.”

Brookings scholar Alice Rivlin, a former vice chairman of the Federal Reserve and a budget director for President Bill Clinton, said the campaign appears to have two goals: to respond to the “flak” the administration is taking over its $3.6 trillion budget request, and to tamp down unrealistic expectations for a speedy recovery.

“The widespread economic view at the moment is that things are getting rapidly worse in the interaction between the credit crunch and the downward spiral in the economy and the downward spiral globally. It’s not a pretty picture,” Rivlin said. The Obama administration is “doing everything they can,” she said. “But people should realize that this is a very serious situation and it won’t turn around fast.”

Summers hit that point repeatedly Friday, saying that despite enactment of “the boldest economic program to promote recovery and expansion in two generations … no one can predict with precision when this crisis will be resolved.” While the nation is being driven deeply into debt, Summers argued that Obama had no choice but to spend on recovery efforts.

Markets are usually self-correcting, Summers said, but the current crisis is of the sort that occurs “two or three times each century,” when the markets are overwhelmed by “vicious cycles” and the “right economic metaphor becomes not a thermostat, but an avalanche.” That avalanche, Summers said, was provoked by an “excess of greed” on Wall Street that has quickly been transformed into “an excess of fear.”

“What we need today is more optimism and more confidence,” Summers said, extolling the bargains to be had in undervalued stocks and throughout the economy. He noted that the Dow Jones industrial average, adjusted for inflation, is at the same level as it was in 1966, “which may be regarded by some as the sale of the century.”

Summers said the administration aims not only to start an economic recovery but to build a more sustainable foundation for future economic expansion. He suggested that people who are focusing solely on the recovery are setting their sights too low.

“Our single most important priority is bringing about economic recovery and ensuring that the next economic expansion, unlike its recent predecessors, is fundamentally sound and not driven by financial excess,” he said. He added that there was “one ineluctable lesson of the history of financial crises: They all end.”