Obama: Housing Is "Probably The Biggest Drag" On The Economy

April 21, 2011

Bloomberg

Roger Runningen and Nicholas Johnston

President Barack Obama, on a cross- country trip to sell his deficit reduction plan, said yesterday that the nation’s finances are “unsustainable.”

At a campaign-style town hall meeting at the headquarters of Facebook Inc., Obama described the House Republicans’ budget plan as “fairly radical” and said members of both political parties in Washington need to work together to start reducing the federal deficit in a “balanced way.”

“We have an unsustainable situation,” he said. “We face a critical time where we are going to have to make some decisions -- how do we bring down the debt in the short term, and how do we bring down the debt over the long term?”

After his appearance at Facebook, Obama turned his attention to a private fundraising dinner in San Francisco hosted by Marc R. Benioff, chairman and chief executive officer of Salesforce.com, a cloud computing company. Tickets for the dinner, attended by about 60 people, were $35,800 a person.

Obama spoke after a performance by singer Stevie Wonder, telling a roomful of early supporters: “Some of you were involved in startups. Well, I was a startup.”

“We started something in 2008,” Obama said of his first presidential campaign. “We haven’t finished it yet,” he said, reeling off needs to overhaul education, improve clean energy programs and reduce debt and deficits. “I’m going to need you to help me finish it.”

More Fundraising
From there, the president attended a “Gen44” Obama fundraising event at the Nob Hill Masonic Center, where ticket prices ranged between $25 and $2,500, according to a Democratic official who wasn’t authorized to discuss such details publicly.

Obama is to appear at a fundraiser at the St. Regis Hotel in San Francisco today before leaving for Nevada, a politically important state in 2012 with an open Senate seat. The president is scheduled to hold a town hall meeting in Reno at ElectraTherm Inc., a small renewable energy company, giving him a chance to reinforce his push for increased spending on clean-energy technology.

Later in the day, he is to return to California for fundraisers in Los Angeles, including events at Sony Pictures where actor-singer Jamie Foxx is scheduled to appear.

The fundraising events in San Francisco and Los Angeles are expected to bring in between $4 million and $5 million, the Democratic official said.

Bill Carrick, a Democratic strategist based in Los Angeles, described the trip as “not a full-fledged campaign trip, but it has some of the dynamics of preparing to run a campaign,” such as efforts to “start focusing on swing states early so you can broaden the electoral map.”

Reach Out
Facebook, with more than 500 million users, is the world’s largest social network website. It was founded in 2004 by Mark Zuckerberg.

Obama has used social media sites such as Google Inc. (GOOG)’s YouTube to reach out to voters. Yesterday’s session is the first time he has appeared on Facebook, which passed Google last year to become the most visited website in the U.S.

Zuckerberg, joined by Chief Operating Officer Sheryl Sandberg, moderated the event. Obama took questions filed online through the White House’s Facebook page and website, along with those from an audience of Facebook employees, small-business leaders and Silicon Valley entrepreneurs.

Obama said using Facebook allows us to “make sure this isn’t just a one-way conversation.”

“This format and this company, I think, is an ideal means for us to be able to carry on this conversation,” the president said. “We’re having a very serious debate right now about the future direction of our country.”

Separate Plans
The White House and House Republicans have offered separate plans to reduce cumulative budget deficits by $4 trillion, over 12 years and 10 years respectively. Obama’s plan would include $1 trillion in tax increases that his advisers say could be raised from families earning at least $250,000, while the Republicans’ measure wouldn’t raise taxes.

“The Republican budget that was put forward I would say is fairly radical. I wouldn’t call it particularly courageous,” he said. “I would call it short-sighted.”

Obama criticized the Republican plan for preserving tax breaks while chopping funds from programs such as clean energy and for seeking to overhaul Medicare and Medicaid health insurance programs for the elderly and the poor.

“Nothing is easier than solving a problem on the backs of people who are poor or people who are powerless,” he said.

Treasury Yields
While the deficit dominates political debate in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago even as Treasury Department data show that the amount of marketable debt outstanding has risen to more than $9 trillion from about $4.3 trillion in mid-2007. The yield on the benchmark 10-year note is below the average of about 7 percent since 1980 and the average of 5.48 percent in 1998 through 2001, the last time the U.S. had a budget surplus, according to Bloomberg Bond Trader prices.

Ten-year yields fell four basis points, or 0.04 percentage point, to 3.372 percent at 8:38 a.m. in New York, according to Bloomberg Bond Trader prices.

Stocks rallied yesterday, as the Dow Jones Industrial Average surged 1.5 percent to 12,453.54, hitting its highest level since June 2008.

Obama said he remains committed to pushing for an overhaul of the nation’s immigration laws. He said members of both parties must cooperate to get it done.

Housing Market
The president said the economy is still “not growing quite as fast as we would like” even after creating almost 2 million jobs in the past 18 months. He called the housing market “probably the biggest drag” on the economy.

“What I’m really concerned about is making sure that the housing market overall recovers enough that it’s not such a huge drag on the economy because, if it isn’t, then people will have more confidence, they’ll spend more, more people will get hired, and overall the economy will improve,” he said. “It’s still tough out there.”

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