Transcript: President Barack Obama's speech on the state of the economy, from April 14, 2009

Tuesday, April 14, 2009 - 12:36 PM

Read a transcript of President Barack Obama's speech on the state of the economy from April 14, 2009, and discuss the economy in The Takeaway's "user-annotated" document viewer.

PRESIDENT BARACK OBAMA: THANK YOU SO MUCH FOR THE GRACIOUS INTRODUCTION AND THANK YOU FOR BRINGING YOUR FAMILY. JT. I APPRECIATE THAT. WE'RE GONNA INVITE HIM OVER TO HANG OUT WITH THE GIRLS. HE'S A PRETTY GOOD LOOKING YOUNG MAN. TO MAYOR ADRIAN FENTY, WHO'S DOING SUCH A GREAT JOB WITH THIS CITY, THANK YOU. TO REPRESENTATIVE DON EDWARDS WHO IS HERE, AND REPRESENTS MARYLANDS 4TH DISTRICT, THANK YOU. TO GEORGETOWN UNIVERSITY STUDENTS, IT IS GOOD TO SEEY OU. THANK YOU. YES, IT IS GOOD TO BE BACK, I HAVE APPEARED IN THIS ROOM DURING THE CAMPAIGN, AND HAD A WONDERFUL RECEPTION THEN AND IT'S WONDERFUL TO BE BACK AND TO BE BACK WITH ALL OF YOU.

WE'RE GOING TO TALK ABOUT THE ECONOMY TODAY. AND I WAS TELLING PRESIDENT JOY THIS MAY BE A SLIGHTLY LONGER SPEECH THAN I USUALLY GIVE, BUT IT'S A SLIGHTLY BIGGER TOPIC, AND THAT IS HOW WE ARE GOING TO DEAL WITH SO MANY OF OUR ECONOMIC CHALLENGES. IT HAS BEEN 12 WEEKS NOW SINCE MY ADMINISTRATION BEGAN. AND I THINK EVEN OUR CRITICS WOULD AGREE THAT AT THE VERY LEAST WE'VE BEEN BUSY. IN JUST UNDER 3 MONTHS WE'VE RESPONDED TO AN EXTRAORDINARY AMOUNT OF ECONOMIC CHALLENGES WITH EXTRAORDINARY ACTION. ACTION THAT HAS BEEN UNPRECIDENTED BOTH IN TERMS OF IT'S SCALE AND IT'S SPEED. AND I KNOW THAT SOME OF HAVE ACCUSED US OF TAKING ON TOO MUCH AT ONCE. OTHERS BELIEVE WE HAVEN'T DONE ENOUGH. AND MANY AMERICANS ARE SIMPLY WONDERING HOW ALL OF OUR DIFFERENT PROGRAMS AND POLICIES FIT TOGETHER IN A SINGLE OVERARCHING STRATEGY THAT WILL MOVE THIS ECONOMY FROM RECESSION TO RECOVERY AND ULTIMATELY TO PROSPERITY. SO TODAY I WANT TO STEP BACK FOR A MOMENT AND EXPLAIN THIS STRATEGY AS CLEARLY AS I CAN. THIS IS GOING TO BE PROSE AND NOT POETRY. I WANT TO TALK ABOUT WHAT WE'VE DONE, WHY WE'VE DONE IT, AND WHAT WE HAVE LEFT TO DO. I WANT TO UPDATE YOU ON THE PROGRESS WE'VE MADE, BUT I ALSO WANT TO BE HONEST ABOUT THE PITFALLS THAT MAY STILL LIE AHEAD. MOST OF ALL I WANT EVERY AMERICAN TO KNOW THAT EACH ACTION WE TAKE AND EACH POLICY WE PURSUE IS DRIVEN BY A LARGER VISION OF AMERICAS FUTURE, A FUTURE WHERE SUSTAINED ECONOMIC GROWTH CREATES GOOD JOBS AND RISING INCOMES. A FUTURE WHERE PROSPERITY IS FULED NOT BY EXCESSIVE DEBT, OR FLEETING PROFITS, OR RECLESS SPECULATION, BUT IS INSTEAD BUILT BY SKILLED, PRODUCTIVE WORKERS, BY SOUND INVESTMENTS, THAT WILL SPREAD OPPORTUNITY AT HOME AND ALLOW THIS NATION TO LEAD THE WORLD IN THE TECHNOLOGIES AND INNOVATIONS, DISCOVERIES THAT WILL SHAPE THE 21ST CENTURY. THAT IS THE AMERICA I SEE. THAT IS THE AMERICA THAT GEORGETOWN IS PREPARING SO MANY OF YOU FOR. THAT IS THE FUTURE THAT I KNOW THAT WE CAN HAVE.

NOW, TO UNDERSTAND HOW WE GET THERE, WE FIRST NEED TO UNDERSTAND HOW WE GOT HERE. RECESSIONS ARE NOT UNCOMMON. MARKETS AND ECONOMIES NATURALLY EBB AND FLOW, AS WE'VE SEEN IN OUR HISTORY. BUT THIS RECESSION IS DIFFERENT. THIS RECESSION WAS NOT CAUSED BY A NORMAL DOWNTURN IN THE BUSINESS CYCLE. IT WAS CAUSED BY A PERFECT STORMOF IRRESPONSIBILITY AND POOR DECISION-MAKING THAT STRETCHED FROM WALL STREET TO WASHINGTON TO MAIN STREET.AS HAS BEEN WIDELY REPORTED, IT STARTED IN THE HOUSING MARKET. DURING THE COURSE OF THE DECADE, THE FORMULA FOR BUYING A HOUSE CHANGED. INSTEAD OF SAVING THEIR PENNIES TO BUY THEIR DREAM HOUSE, MANY AMERICANS FOUND THAT SUDDENLY THEY COULD TAKE OUT LOANS THAT BY TRADITIONAL STANDARDS, THEIR INCOMES JUST COULD NOT SUPPORT. OTHERS WERE TRICKED INTO SIGNING THESE SUBPRIME LOANS BY LENDERS WHO WERE TRYING TO MAKE A QUICK PROFIT. THE REASON THESE LOANS WERE SO READILY AVAILABLE WAS THAT WALL STREET SAW BIG PROFITS TO BE MADE. INVESTMENT BANKS WOULD BUY AND PACKAGE TOGETHER THESE QUESTIONABLE MORTGAGES INTO SECURITIES, ARGUING THAT BY POOLING THE MORTGAGES, THE RISKS HAD SOMEHOW BEEN REDUCED. AND CREDIT AGENCIES THAT ARE SUPPOSED TO HELP INVESTORS DETERMINE THE SOUNDNESS OF VARIOUS INVESTMENTS, STAMPED THE SECURITIES WITH THEIR SAFEST RATING, WHEN THEY SHOULD HAVE BEEN LABELED "BUYER BEWARE." NOW NO ONE REALLY KNEW WHAT THE ACTUAL VALUE OF THESE SECURITIES REALLY WERE. NO ONE FULLY UNDERSTOOD WHAT THE RISKS WERE. BUT SINCE THE HOUSING MARKET WAS BOOMING AND PRICES WERE RISING, BANKS AND INVESTORS JUST KEPT BUYING AND SELLING THEM. ALWAYS PASSING OFF THE RISK TO SOMEONE ELSE FOR A GREATER PROFIT. WITHOUT HAVING TO TAKE ANY OF THE ULTIMATE RESPONSIBILITY. BANKS TOOK ON MORE DEBT THAN THEY COULD HANDLE. THE GOVERNMENT-CHARTERED COMPANIES, FANNIE MAE AND FREDDIE MAC, WHOSE TRADITIONAL MANDATE WAS TO HELP SUPPORT TRADITIONAL MORTGAGES, DECIDED TO GET IN ON THE ACTION BY BUYING AND HOLDING BILLIONS OF DOLLARS OF THESE SECURITIES. AIG, THE BIGGEST INSURER IN THE WORLD, THAT HAD A VERY TRADITIONAL INSURANCE BUSINESS, THAT WAS VERY PROFITABLE, DECIDED TO MAKE PROFITS SUDDENLY BY SELLING BILLIONS OF DOLLARS OF COMPLICATED FINANCIAL INSTRUMENTS THAT SUPPOSEDLY INSURED THESE SECURITIES. EVERYBODY WAS MAKING RECORD PROFITS. EXCEPT THE WEALTH CREATED WAS REAL ONLY ON PAPER. AND AS THE BUBBLE GREW, THERE WAS ALMOST NO ACCOUNTABILITY OR OVERSIGHT FROM ANYONE IN WASHINGTON. THEN THE HOUSING BUBBLE BURST. HOME PRICES FELL, PEOPLE BEGAN TO DEFAULT ON THEIR SUBPRIME MORTGAGES AND THE VALUE OF ALL THESE LOANS AND SECURITIES PLUMMETED. BANKS AND INVESTORS COULDN'T FIND ANYONE TO BUY THEM. GREED GAVE WAY TO FEAR. INVESTORS PULLED THEIR MONEY OUT OF THE MARKET. LARGE FINANCIAL INSTITUTIONS THAT DIDN'T HAVE ENOUGH MONEY ON HAND TO PAY OFF ALL THEIR OBLIGATIONS COLLAPSED. OTHER BANKS HELD ON TIGHT TO THEIR MONEY, AND SIMPLY STOPPED LENDING. NOW THIS THIS IS WHEN THE CRISIS SPREAD FROM WALL STREET TO MAIN STREET. THE ABILITY TO GET A LOAN IS HOW YOU FINANCE EVERYTHING FROM THE PURCHASE OF A HOME TO A CAR TO AS YOU ALL KNOW VERY WELL, A COLLEGE EDUCATION. IT'S HOW STORES STOCK THEIR SHELVES AND FARMS BUY EQUIPMENT AND BUSINESSES MAKE PAYROLL. SO WHEN BANKS STOP LENDING MONEY, BUSINESSES STARTED LAYING OFF WORKERS. WHEN LAID OFF WORKERS HAD LESS MONEY TO SPEND, BUSINESSES WERE FORCED TO LAY OFF EVEN MORE WORKERS. WHEN PEOPLE COULDN'T GET A CAR LOAN, A BAD SITUATION AT THE AUTO COMPANIES BECAME EVEN WORSE. WHEN PEOPLE COULDN'T GET HOME LOANS, THE CRISIS IN THE HOUSING MARKET ONLY DEEPENED. BECAUSE THE INFECTED SECURITIES WERE BEING TRADED WORLDWIDE AND OTHER NATIONS ALSO HAD WEAK REGULATIONS, THIS RECESSION SOON BECAME GLOBAL. WHEN OTHER NATIONS CAN'T AFFORD TO BUY OUR GOODS, IT SLOWS OUR ECONOMY EVEN FURTHER.

SO THIS IS THE SITUATION, THE DOWNWARD SPIRAL WE CONFRONTED ON THE DAY WE TOOK OFFICE. SO OUR MOST URGENT TASK HAS BEEN TO CLEAR AWAY THE WRECKAGE, REPAIR THE IMMEDIATE DAMAGE TO THE ECONOMY, AND DO EVERYTHING WE CAN TO PREVENT A LARGER COLLAPSE. AND SINCE THE PROBLEMS WE FACE ARE ALL WORKING OFF EACH OTHER TO FEED A VICIOUS ECONOMIC DOWNTURN, WE'VE HAD NO CHOICE BUT TO ATTACK ALL FRONTS OF OUR ECONOMIC CRISIS SIMULTANEOUSLY.

NOW, THE FIRST STEP WAS TO FIGHT A SEVERE SHORTAGE OF DEMAND IN THE ECONOMY. SO THE FEDERAL RESERVE DID THIS BY DRAMATICALLY LOWERING INTEREST RATES LAST YEAR IN ORDER TO BOOST INVESTMENT. MY ADMINISTRATION AND CONGRESS BOOSTED DEMAND BY PASSING THE LARGEST RECOVERY PLAN IN OUR NATION'S HISTORY. A PLAN THAT'S ALREADY IN THE PROCESS OF SAVING OR CREATING 3.5 MILLION JOBS IN THE NEXT TWO YEARS AND PUTTING MONEY DIRECTLY IN PEOPLES POCKETS WITH A TAX CUT FOR 95% OF WORKING FAMILIES NOW SHOWING UP IN PAYCHECKS ACROSS AMERICA. AND TO CUSHION THE BLOW OF THIS RECESSION, WE ALSO PROVIDED EXTENDED UNEMPLOYMENT BENEFITS AND CONTINUED HEALTH CARE COVERAGE TO AMERICANS WHO LOST THEIR JOBS THROUGH NO FAULT OF THEIR OWN. NOW, YOU WILL RECALL THAT SOME ARGUED THIS RECOVERY PLAN IS A CASE OF IRRESPONSIBLE GOVERNMENT SPENDING AND IT'S SOMEHOW TO BLAME FOR THE LONG-TERM DEFICIT PROJECTIONS AND THAT THE FEDERAL GUST SHOULD BE BE CUTTING INSTEAD OF INCREASING SPENDING RIGHT NOW. SO I WANT TO TACKLE THIS ARGUMENT HEAD ON. TO BEGIN WITH, ECONOMISTS ON BOTH THE LEFT AND THE RIGHT AGREE THAT THE LAST THING A GOVERNMENT SHOULD DO IN THE MIDDLE OF A RECESSION IS TO CUT BACK ON SPENDING. YOU SEE, WHEN THIS RECESSION BEGAN, MANY FAMILIES SAT AROUND THE KITCHEN TABLE AND TRIED TO FIGURE OUT WHERE THEY COULD CUT BACK. SO HAVE MANY BUSINESSES. THIS IS A COMPLETELY REASONABLE AND UNDERSTANDABLE REACTION. BUT IF EVERYBODY, IF EVERY FAMILY IN AMERICA, IF EVERY BUSINESS IN AMERICA CUTS BACK ALL AT ONCE, THEN NO ONE IS SPENDING ANY MONEY WHICH MEANS THERE ARE NO CUSTOMERS WHICH MEANS THERE ARE MORE LAYOFFS, WHICH MEANS THAT THE ECONOMY GETS EVEN WORSE. THAT'S WHY THE GOVERNMENT HAS TO STEP IN AND TEMPORARILY BOOST SPENDING IN ORDER TO STIMULATE DEMAND. THAT'S EXACTLY WHAT WE'RE DOING RIGHT NOW.

NOW SECOND, I ABSOLUTELY AGREE OUR LONG-TERM DEFICIT IS A MAJOR PROBLEM THAT WE HAVE TO FIX. BUT THE FACT IS THAT THIS RECOVERY PLAN REPRESENTS ONLY A TINY FRACTION OF THAT LONG-TERM DEFICIT. AS I'LL DISCUSS IN A MOMENT, THE KEY TO DEALING WITH THE LONG-TERM DEFICIT AND NATIONAL DEBT IS TO GET A HANDLE ON OUT OF CONTROL HEALTH CARE COSTS. NOT TO STAND BY AS THE ECONOMY GOES INTO FREE FALL. SO THE RECOVERY PLAN HAS BEEN THE FIRST STEP IN CONFRONTING THIS ECONOMIC CRISIS. THE SECOND STEP HAS BEEN TO HEAL OUR FINANCIAL SYSTEM SO THAT CREDIT IS ONCE AGAIN FLOWING TO BUSINESSES AND FAMILIES WHO RELY ON IT. THE HEART OF THIS FINANCIAL CRISIS IS THAT TOO MANY BANKS AND OTHER FINANCIAL INSTITUTIONS SIMPLY STOPPED LENDING MONEY IN A CLIMATE OF FEAR BANKS WERE UNABLE TO REPLACE THEIR LOSSES FROM SOME OF THOSE BAD MORTGAGES BY RAISING NEW CAPITAL ON THEIR OWN. AND THEY WERE UNWILLING TO LEND THE MONEY THEY DID HAVE BECAUSE THEY WERE AFRAID THAT NO ONE WOULD PAY IT BACK. IT'S FOR THIS REASON THAT THE LAST ADMINISTRATION USED WHAT THEY CALLED THE "TROUBLED ASSET RELIEF PROGRAM" OR T.A.R.P. TO PROVIDE THESE BANKS WITH FINANCIAL ASSISTANCE IN ORDER TO GET THEM LENDING AGAIN. NOW, I UNDERSTAND THAT T.A.R.P. IS NOT POPULAR. I HAVE TO SAY THAT I DON'T AGREE WITH SOME OF THE WAYS THE T.A.R.P. PROGRAM WAS MANAGED. BUT, I DO AGREE THAT BROADER RATIONALE THAT WE MUST PROVIDE BANKS WITH THE CAPITAL AND THE CONFIDENCE NECESSARY TO START LENDING AGAIN. THAT'S THE PURPOSE OF THE STRESS TEST THAT WILL SOON TELL US HOW MUCH ADDITIONAL CAPITAL WILL BE NEEDED TO SUPPORT LENDING AT OUR LARGEST BANKS. IDEALLY, THESE NEEDS WILL BE MET BY PRIVATE INVESTORS WILLING TO PUT IN MONEY TO THESE BANKS BUT WHERE THAT'S NOT POSSIBLE, AND BANKS REQUIRE SUBSTANTIAL ADDITIONAL RESOURCES FROM THE GOVERNMENT, THEN WE WILL HOLD ACCOUNTABLE THOSE WHO ARE RESPONSIBLE, WILL FORCE NECESSARY ADJUSTMENTS, WE'LL PROVIDE THE SUPPORT TO CLEAN UP THOSE BANK BALANCE SHEETS, AND WE'LL ASSURE CONTINUITY OF A STRONG AND VIABLE INSTITUTION THAT CAN SERVE OUR PEOPLE AND OUR ECONOMY.

OF COURSE, THERE ARE SOME WHO DIFFER WITH OUR APPROACH. ON THE ONE HAND THERE ARE SOME WHO ARGUE THAT THE GOVERNMENT SHOULD STAND BACK AND SIMPLY LET THESE BANKS FAIL. ESPECIALLY SINCE IN MANY CASES IT WAS THEIR BAD DECISIONS THAT HELPED CREATE THE CRISIS IN THE FIRST PLACE. BUT WHETHER WE LIKE IT OR NOT, HISTORY HAS SHOWN REPEATEDLY THAT WHEN NATIONS DO NOT TAKE EARLY AND AGGRESSIVE ACTION TO GET CREDIT FLOWING AGAIN, THEY HAVE CRISIS THAT LAST YEARS AND YEARS INSTEAD OF MONTHS AND MONTHS. YEARS OF LOW GROWTH. YEARS OF LOW JOB CREATION. YEARS OF LOW INVESTMENT. ALL OF WHICH COST THESE NATIONS FAR MORE THAN BOLD, UP FRONT ACTION. ALTHOUGH THERE ARE A LOT OF AMERICANS WHO UNDERSTANDABLY THINK THAT GOVERNMENT MONEY WOULD BE BETTER SPENT GOING DIRECTLY TO FAMILIES AND BUSINESSES INSTEAD OF TO BANKS, ONE OF MY MOST FREQUENT QUESTIONS IN THE LETTERS THAT I GET FROM CONSTITUENTS IS "WHERE'S MY BAILOUT?" I UNDERSTAND THE SENTIMENT. IT MAKES SENSE INTUITIVELY AND MORALLY, BUT THE TRUTH IS THAT A DOLLAR OF CAPITAL IN A BANK CAN ACTUALLY RESULT IN $8 OR $10 OF LOANS TO FAMILIES AND BUSINESSES. THAT'S A MULTIPLIER EFFECT THAT CAN ULTIMATELY LEAD TO A FASTER PACE OF ECONOMIC GROWTH. THAT'S WHY WE HAVE TO FIX THE BANKS.

ON THE OTHER HAND THERE ARE SOME THAT DON'T DISPUTE WE NEED TO SURE UP THE BANKING SYSTEM BUT SUGGEST THAT WE'VE BEEN TOO TIMID IN HOW WE GO ABOUT IT. THIS IS THE NATIONALIZATION ARGUMENT THAT SOME OF YOU MAY HAVE HEARD. THE ARGUMENT SAYS THAT THE FEDERAL GOVERNMENT SHOULD HAVE ALREADY PREEMPTIVELY STEPPED IN AND TAKEN OVER MAJOR FINANCIAL INSTITUTIONS THE WAY THAT THE FDIC INTERVENES IN SMALLER BANKS AND THAT OUR FAILURE, MY ADMINISTRATION'S FAILURE TO DO SO IS YET ANOTHER EXAMPLE OF WASHINGTON CODDLING WALL STREET. WHY AREN'T YOU TOUGHER ON THE BANKS? LET ME BE CLEAR. THE REASON WE HAVE NOT TAKEN THIS STEP HAS NOTHING TO DO WITH ANY IDEOLOGICAL OR POLITICAL JUDGMENT WE MADE ABOUT GOVERNMENT INVOLVEMENT IN BANKS. IT CERTAINLY IS NOT BECAUSE OF ANY CONCERN WE HAVE FOR THE MANAGEMENT AND SHAREHOLDERS WHOSE ACTIONS HELPED TO CAUSE THIS MESS. RATHER IT'S BECAUSE WE BELIEVE THAT PREEMPTIVE GOVERNMENT TAKEOVERS ARE LIKELY TO END UP COSTING TAXPAYERS EVEN MORE IN THE END. AND BECAUSE IT'S MORE LIKELY TO UNDERMINE THAN CREATE CONFIDENCE. GOVERNMENTS SHOULD PRACTICE THE SAME PRINCIPLE AS DOCTORS. FIRST, DO NO HARM. REST ASSURED, WE'LL DO WHATEVER IS NECESSARY TO GET CREDIT FLOWING AGAIN BUT WE'LL DO SO IN WAYS THAT MINIMIZE RISK TO TAXPAYERS AND TO THE BROADER ECONOMY. TO THAT END IN ADDITION TO THE PROGRAM TO PROVIDE CAPITALS TO THE BANKS WE LAUNCHED A PLAN THAT WILL PAIR GOVERNMENT RESOURCES WITH PRIVATE INVESTMENT IN ORDER TO CLEAR AWAY THE OLD LOANS AND SECURITIES, THE SO-CALLED TOXIC ASSETS THAT ARE ALSO PREVENTING OUR BANKS FROM LENDING MONEY.

NOW, WHAT WE'VE ALSO LEARNED DURING THIS CRISIS IS THAT OUR BANKS AREN'T THE ONLY INSTITUTIONS AFFECTED BY THESE TOXIC ASSETS THAT ARE CLOGGING THE FINANCIAL SYSTEM. AIG FOR EXAMPLE IS NOT A BANK. IT'S AN INSURANCE COMPANY AS I MENTIONED. AND YET BECAUSE IT CHOSE TO INSURE BILLIONS OF DOLLARS WORTH OF RISKY ASSETS, ESSENTIALLY CREATING A HEDGE FUND ON TOP OF AN INSURANCE COMPANY, ITS FAILURE COULD THREATEN THE ENTIRE FINANCIAL SYSTEM AND FREEZE LENDING EVEN MORE. THAT'S WHY AS FRUSTRATING AS IT IS AND I PROMISE YOU NOBODY IS MORE FRUSTRATED THAN ME WITH AIG. I PROMISE. WE'VE HAD TO PROVIDE SUPPORT FOR AIG BECAUSE THE ENTIRE SYSTEM AS FRAGILE AS IT IS COULD BE PROFOUNDLY ENDANGERED IF AIG WENT INTO A LIQUIDATION BANKRUPTCY. IT'S ALSO WHY WE NEED NEW LEGAL AUTHORITY SO THAT WE HAVE THE POWER TO INTERVENE IN SUCH FINANCIAL INSTITUTIONS THE SAME WAY THAT BANKRUPTCY COURTS DO WITH BUSINESSES THAT HIT HARD TIMES BUT DON'T POSE SYSTEMIC RISKS AND THAT WAY WE CAN RESTRUCTURE BUSINESSES IN AN ORDERLY WAY THAT DOESN'T INDUCE PANIC IN THE FINANCIAL SYSTEM AND BY THE WAY WILL ALLOW US TO RESTRUCTURE INAPPROPRIATE BONUS CONTRACTS WITHOUT CREATING A PERCEPTION THE GOVERNMENT CAN JUST CHANGE COMPENSATION RULES ON A WHIM. THIS IS ALSO WHY WE'RE MOVING AGGRESSIVELY TO UNFREEZE MARKETS AND JUMP-START LENDING OUTSIDE OF THE BANKING SYSTEM. WHERE MORE THAN HALF OF ALL LENDING IN AMERICA ACTUALLY TAKES PLACE. TO DO THIS WE STARTED A PROGRAM THAT WILL INCREASE GUARANTEES FOR SMALL BUSINESS LOANS AND UNLOCK THE MARKET FOR AUTO LOANS AND STUDENT LOANS AND STABILIZE THE HOUSING MARKET WE LAUNCHED A PLAN TO SAVE UP TO 4 MILLION RESPONSIBLE HOMEOWNERS FROM FORECLOSURE AND HELP MANY MILLIONS MORE TO REFINANCE THEIR HOMES. IN A FEW WEEKS WE'LL ALSO REASSESS THE STATE OF CHRYSLER AND GENERAL MOTORS. TWO COMPANIES WITH AN IMPORTANT PLACE IN OUR HISTORY AND A LARGE FOOTPRINT IN OUR ECONOMY. BUT TWO COMPANIES THAT HAVE ALSO FALLEN ON HARD TIMES. LATE LAST YEAR THE COMPANIES WERE GIVEN TRANSITIONAL LOANS BY THE PREVIOUS ADMINISTRATION TO TIE THEM OVER WHILE THEY WORK TO DEVELOP VIABILITY PLANS. THE PLANS THEY CREATED FELL SHORT. WE HAVE GIVEN THEM ADDITIONAL TIME TO WORK THESE COMPLEX ISSUES THROUGH. BY THE WAY, WE OWE THAT NOT TO EXECUTIVES WHOSE BAD BETS CONTRIBUTED TO WEAKENING OF THEIR COMPANIES BUT TO HUNDREDS OF THOUSANDS OF WORKERS WHOSE WORK LIES IN THE BALANCE. ENTIRE TOWNS, ENTIRE COMMUNITIES, ENTIRE STATES ARE PROFOUNDLY IMPACTED BY WHAT HAPPENS IN THE AUTO INDUSTRY. NOW, IT IS OUR FEVERENT HOPE THAT IN THE COMING WEEKS CHRYSLER WILL FIND A VIABLE PARTNER, GM WILL DEVELOP A BUSINESS PLAN TO PUT IT ON A PATH TO PROFITABILITY WITHOUT ENDLESS SUPPORT FROM AMERICAN TAXPAYERS. IN THE MEANTIME WE'RE TAKING STEPS TO SPUR DEMAND FOR AMERICAN CARS AND PROVIDE RELIEF FOR AUTOWORKERS IN THEIR COMMUNITIES AND WE'LL CONTINUE TO REAFFIRM THIS NATION'S COMMITMENT TO A 21st CENTURY AMERICAN AUTO INDUSTRY THAT CREATES NEW JOBS AND BUILDS THE FUEL EFFICIENT CARS AND TRUCKS THAT WILL CARRY US TOWARD A CLEAN ENERGY FUTURE.

FINALLY, TO COORDINATE A GLOBAL RESPONSE TO THIS GLOBAL RECESSION, I WENT TO THE MEETING OF THE G-20 NATIONS IN LONDON THE OTHER WEEK. EACH NATION HAS UNDERTAKEN SIGNIFICANT STIMULUS TO SPUR DEMAND. ALL AGREED TO PURSUE TOUGHER REGULATORY REFORMS. WE ALSO AGREED TO TRIPLE THE LENDING CAPACITY OF THE INTERNATIONAL MONETARY FUND WHICH AS MANY OF YOU KNOW IS AN INTERNATIONAL FINANCIAL INSTITUTION SUPPORTED BY ALL OF THE MAJOR ECONOMIES SO THEY CAN PROVIDE DIRECT ASSISTANCE TO DEVELOPING NATIONS AND VULNERABLE POPULATIONS. THAT'S NOT JUST CHARITY. BECAUSE AMERICA'S SUCCESS DEPENDS ON WHETHER OTHER NATIONS HAVE THE ABILITY TO BUY WHAT WE SELL, IT'S IMPORTANT THAT WE PAY ATTENTION TO THESE EMERGING MARKETS. WE PLEDGED TO AVOID THE TRADE BARRIERS AND PROTECTIONISM THAT HURTS US ALL IN THE END AND WE DECIDED TO MEET AGAIN IN THE FALL TO GAUGE OUR PROGRESS AND TAKE ADDITIONAL STEPS IF NECESSARY. SO THAT'S WHERE WE'VE BEEN. THAT'S WHAT WE'VE DONE IN THE LAST THREE MONTHS. ALL THESE ACTIONS, THE RECOVERY ACT, THE BANK CAPITALIZATION PROGRAM, THE HOUSING PLAN, THE STRENGTHENING OF THE NONBACKED CREDIT MARKET, THE AUTO PLAN, AND OUR WORK AT THE G-20 ALL HAVE BEEN NECESSARY PIECES OF THE RECOVERY PUZZLE. THEY'VE BEEN DESIGNED TO INCREASE DEMAND, TO GET CREDIT FLOWING AGAIN TO FAMILIES AND BUSINESSES AND TO HELP FAMILIES AND BUSINESSES RIDE OUT THE STORM. AND TAKEN TOGETHER, THESE ACTIONS ARE STARTING TO GENERATE SIGNS OF ECONOMIC PROGRESS. BECAUSE OF OUR RECOVERY PLAN, SCHOOLS AND POLICE DEPARTMENTS HAVE CANCELED PLANNED LAYOFFS. CONSTRUCTION COMPANIES ARE REHIRING WORKERS TO BUILD ENERGY EFFICIENT WINDOWS TO NEW ROADS AND HIGHWAYS. OUR HOUSING PLAN HELPED LEAD TO A SPIKE IN THE NUMBER OF HOMEOWNERS TAKING ADVANTAGE OF HISTORICALLY LOW MORTGAGE RATES BY REFINANCING, WHICH IS LIKE PUTTING A $200,000 TAX CUT IN YOUR POCKET. OUR PROGRAM TO STABILIZE THE MARKET FOR AUTO LOANS AND STUDENT LOANS IS STARTING TO UNFREEZE THIS MARKET AND SECURITIZE MORE OF THIS LENDING IN THE PAST FEW WEEKS. AND SMALL BUSINESSES ARE SEEING A JUMP IN LOAN ACTIVITY FOR THE FIRST TIME IN MONTHS. THIS IS ALL WELCOME AND ENCOURAGING NEWS.

IT DOES NOT MEAN THE HARD TIMES ARE OVER. 2009 WILL CONTINUE TO BE A DIFFICULT YEAR FOR AMERICA'S ECONOMY. OBVIOUSLY MOST DIFFICULT FOR THOSE WHO HAVE LOST THEIR JOBS. THE SEVERITY OF THIS RECESSION WILL CAUSE MORE JOB LOSS, MORE FORECLOSURES AND MORE PAIN BEFORE IT ENDS. THE MARKET WILL CONTINUE TO RISE AND FALL. CREDIT IS STILL NOT FLOWING NEARLY AS EASILY AS IT SHOULD. THE PROCESS FOR RESTRUCTURING AIG AND THE AUTO COMPANIES WILL INVOLVE DIFFICULT AND SOMETIMES UNPOPULAR CHOICES. WE'RE NOT FINISHED YET ON THAT FRONT. AND ALL OF THIS MEANS THAT THERE'S MUCH MORE WORK TO BE DONE. BUT ALL THIS MEANS YOU CAN CONTINUE TO EXPECT AN UNRELENTING, UNYIELDING DAY BY DAY EFFORT FROM THIS ADMINISTRATION TO FIGHT FOR ECONOMIC RECOVERY ON ALL FRONTS. BUT EVEN AS WE CONTINUE TO CLEAR AWAY THE WRECKAGE AND ADDRESS THE IMMEDIATE CRISIS, IT IS MY FIRM BELIEF THAT OUR NEXT TASK BEGINNING NOW IS TO MAKE SURE SUCH A CRISIS NEVER HAPPENS AGAIN. EVEN AS WE CLEAN UP BALANCE SHEETS AND GET CREDIT FLOWING AGAIN, EVEN AS PEOPLE START SPENDING AND BUSINESSES START HIRING, ALL OF THAT'S GOING TO HAPPEN. WE HAVE TO REALIZE THAT WE CANNOT GO BACK TO THE BUBBLE AND BUST ECONOMY THAT LED US TO THIS POINT. IT IS SIMPLY NOT SUSTAINABLE TO HAVE A 21st CENTURY FINANCIAL SYSTEM THAT IS GOVERNED BY 20th CENTURY RULES AND REGULATIONS THAT ALLOWED THE RECKLESSNESS OF A FEW TO THREATEN THE ENTIRE ECONOMY. IT IS NOT SUSTAINABLE TO HAVE AN ECONOMY WHERE IN ONE YEAR 40% OF OUR CORPORATE PROFITS CAME FROM A FINANCIAL SECTOR THAT WAS BASED ON INFLATED HOME PRICES, MAXED OUT CREDIT CARDS, OVERLEVEREGED BANKS, OVERVALUED ASSETS. IT'S NOT SUSTAINABLE TO HAVE AN ECONOMY WHERE THE INCOMES OF THE TOP 1% HAVE SKYROCKETED WHILE THE TYPICAL WORKING HOUSEHOLD HAS SEEN THEIR INCOMES DECLINE BY NEARLY $2,000. THAT'S JUST NOT A SUSTAINABLE MODEL FOR LONG-TERM PROSPERITY. FOR EVEN AS TOO MANY WERE OUT THERE CHASING BIGGER BONUSES AND SHORT-TERM PROFITS OVER THE LAST DECADE, WE CONTINUE TO NEGLECT THE LONG-TERM THREATS TO OUR PROSPERITY. THE QUESTIONING BURDENS THAT THE RISING COST OF HEALTH CARE IS PLACING ON FAMILIES BUSINESS. THE FAILURE OF OUR EDUCATION SYSTEM TO PREPARE WORKERS FOR A NEW AGE. THE PROGRESS THAT OTHER NATIONS ARE MAKING ON CLEAN ENERGY INDUSTRIES AND TECHNOLOGIES WHILE WE REMAIN ADDICTED TO FOREIGN OIL. THE GROWING DEBT THAT WE'RE ASSING ON TO OUR CHILDREN. EVEN AFTER WE EMERGE FROM THE CURRENT RECESSION, THESE CHALLENGES WILL STILL REPRESENT MAJOR OBSTACLES THAT STAND IN THE WAY OF OUR SUCCESS IN THE 21st CENTURY.

SO WE'VE GOT A LOT OF WORK TO DO. NOW, THERE'S A PARABLE ON THE SERMON OF THE MOUNT. THERE'S A STORY OF TWO MEN. THE FIRST BUILT HIS HOUSE ON A PILE OF SAND. IT WAS SOON DESTROYED WHEN A STORM HIT. BUT THE SECOND IS KNOWN AS THE WISE MAN FOR WHEN THE RAIN DESCENDED AND THE FLOODS CAME AND THE WINDS BLEW, AND BEAT UPON THAT HOUSE, IT FELL NOT FOR IT WAS FOUNDED UPON A ROCK. IT WAS FOUNDED UPON A ROCK. WE CANNOT REBUILD THIS ECONOMY ON THE SAME PILE OF SAND. WE MUST BUILD OUR HOUSE UPON A ROCK. WE MUST LAY A NEW FOUNDATION FOR GROWTH AND PROSPERITY. A FOUNDATION THAT WILL MOVE US FROM AN ERA OF BORROW AND SPEND TO ONE WHERE WE SAVE AND INVEST. WHERE WE CONSUME LESS AT HOPE AND SEND MORE EXPORTS ABROAD. IT'S A FOUNDATION BUILT ON FIVE PILLARS THAT WILL GROW OUR ECONOMY AND MAKE THIS NEW CENTURY ANOTHER AMERICAN CENTURY. NUMBER ONE, NEW RULES FOR WALL STREET THAT WILL REWARD DRIVE AND INNOVATION AND NOT RECKLESS RISK TAKING. NUMBER TWO, NEW INVESTMENTS IN EDUCATION THAT WILL MAKE OUR WORKFORCE MORE SKILLED AND COMPETITIVE. NUMBER THREE, NEW INVESTMENTS IN RENEWABLE ENERGY AND TECHNOLOGY THAT WILL CREATE NEW JOBS AND NEW INDUSTRIES. NUMBER FOUR, NEW INVESTMENTS IN HEALTH CARE THAT WILL CUT COSTS FOR FAMILIES AND BUSINESSES AND NUMBER FIVE, NEW SAVINGS IN OUR FEDERAL BUDGET THAT WILL BRING DOWN THE DEBT FOR FUTURE GENERATIONS. AND THAT IS THE NEW FOUNDATION WE MUST BUILD. THAT'S OUR HOUSE BUILT UPON A ROCK. THAT MUST BE OUR FUTURE AND MY ADMINISTRATION'S POLICIES ARE DESIGNED TO ACHIEVE THAT FUTURE. LET ME TALK ABOUT EACH OF THESE STEPS IN TURN.

THE FIRST STEP, WE WILL TAKE TO BUILD THIS FOUNDATION IS TO REFORM THE OUTDATED RULES AND REGULATIONS THAT ALLOWED THIS CRISIS TO HAPPEN IN THE FIRST PLACE. IT'S TIME TO LAY DOWN TOUGH NEW RULES OF THE ROAD FOR WALL STREET TO ENSURE THAT WE NEVER FIND OURSELVES HERE AGAIN. JUST AS AFTER THE GREAT DEPRESSION NEW RULES WERE DESIGNED FOR BANKS TO AVOID THE KIND OF RECKLESS SPECULATION THAT HELPED TO CREATE THE DEPRESSION SO WE'VE GOT TO MAKE ADAPTATIONS TO OUR CURRENT SET OF RULES AND CREATE RULES THAT PUNISH SHORTCUTS AND ABUSE. RULES THAT TIE SOMEONE'S PAY TO THEIR ACTUAL JOB PERFORMANCE. A NOVEL CONCEPT. RULES THAT PROTECT TYPICAL AMERICAN FAMILIES WHEN THEY BUY A HOME. GET CREDIT CARDS OR INVEST IN A 401(k). SO WE'VE ALREADY BEGUN TO WORK WITH CONGRESS TO SHAPE THIS COMPREHENSIVE NEW REGULATORY FRAME WORK AND I EXPECT A BILL TO ARRIVE ON MY DESK FOR MY SIGNATURE BEFORE THE YEAR IS OUT.

THE SECOND PILLAR OF THIS NEW FOUNDATION IS AN EDUCATION SYSTEM THAT FINALLY PREPARES OUR WORKERS FOR A 21st CENTURY ECONOMY. YOU KNOW, IN THE 20th CENTURY THE GI BILL HELPED SEND A GENERATION TO COLLEGE. FOR DECADES WE LED THE WORLD IN EDUCATIONAL ATTAINMENT AND AS A CONSEQUENCE WE LED THE WORLD IN ECONOMIC GROWTH. BUT IN THIS NEW ECONOMY, WE'VE COME TO TRAIL THE WORLD'S LEADERS IN GRADUATION RATES, IN EDUCATIONAL ACHIEVEMENT AND PRODUCTION OF SCIENTISTS AND ENGINEERS. THAT'S WHY WE HAVE SET A GOAL THAT WILL GREATLY ENHANCE OUR ABILITY TO COMPETE FOR THE HIGH WAGE, HIGH TECH JOBS OF THE 21st CENTURY. BY 2020, AMERICA WILL ONCE AGAIN HAVE THE HIGHEST PROPORTION OF COLLEGE GRADUATES IN THE WORLD. THAT IS THE GOAL THAT WE HAVE SET AND WE INTEND TO MEET. TO MEET THAT GOAL, WE HAVE TO START EARLY. WE HAVE DRAMATICALLY EXPANDED EARLY CHILDHOOD EDUCATION. WE ARE INVESTING IN INNOVATIVE PROGRAMS THAT HAVE PROVEN TO HELP SCHOOLS MEET HIGH STANDARDS AND CLOSE ACHIEVEMENT GAPS. WE'RE CREATING NEW REWARDS THAT TIE TEACHERS' PERFORMANCE AND NEW PATHWAYS FOR ADVANCEMENT. I'VE ASKED EVERY AMERICAN TO COMMIT TO ONE YEAR OR MORE OF HIGHER EDUCATION OR CAREER TRAINING. WE HAVE PROVIDED TAX CREDITS TO MAKE A COLLEGE EDUCATION MORE AFFORDABLE FOR EVERY SINGLE AMERICAN EVEN THOSE WHO ATTEND GEORGETOWN. AND BY THE WAY, ONE OF THE CHANGES THAT I WOULD LIKE TO SEE AND I'LL TALK ABOUT IN THE WEEKS TO COME IS ONCE AGAIN SEEING OUR BEST AND OUR BRIGHTEST COMMIT THEMSELVES TO MAKING THINGS. ENGINEERS, SCIENTISTS, INNOVATEORS, AND FOR SO LONG WE HAVE PLACED AT THE TOP OF OUR PINNACLE FOLKS WHO CAN MANIPULATE NUMBERS. AND ENGAGE IN COMPLEX FINANCIAL CALCULATIONS AND THAT'S GOOD. WE NEED SOME OF THAT. BUT YOU KNOW WHAT WE CAN REALLY USE IS SOME MORE SCIENTISTS AND MORE ENGINEERS WHO ARE BUILDING AND MAKING THINGS THAT WE CAN EXPORT TO OTHER COUNTIRES.

NOW, THE THIRD PILLAR IN THIS NEW FOUNDATION IS TO HARNESS THE RENEWABLE ENERGY THAT CAN CREATE MILLIONS OF NEW JOBS IN NEW INDUSTRIES. WE KNOW THE COUNTRY THAT HARNESSES THIS NEW ENERGY SOURCE WILL LEAD THE 21st CENTURY. WE ALLOWED OTHER COUNTRIES TO OUTPACE US ON THIS RACE TO THE FUTURE. I DO NOT ACCEPT THE FUTURE OF TOMORROW WHERE BUSINESSES ROOT BEYOND OUR BORDERS. IT'S TIME FOR AMERICA TO LEAD AGAIN. THIS NATION'S SUPPLY OF RENEWABLE ENERGY IN THE NEXT THREE YEARS NEEDS TO DOUBLE.AND WE ARE PUTTING AMERICANS TO WORK MAKING OUR HOMES AND BUILDINGS MORE EFFICIENT SO THAT WE CAN SAVE BILLIONS ON OUR ENERGY BILLS AND GROW OUR ECONOMY AT THE SAME TIME. NOW, THE ONLY WAY THAT WE CAN TRULY SPARK THE TRANSFORMATION THAT'S NEEDED IS THROUGH A GRADUAL, MARKET BASED CAP ON CARBON POLLUTION SO THAT CLEAN ENERGY IS THE PROFITABLE KIND OF ENERGY. THERE ARE THOSE WHO HAVE ARGUED THAT WE SHOULDN'T EVEN BE THINKING OR EVEN TALKING ABOUT SUCH A TRANSITION UNTIL THE ECONOMY RECOVERS AND THEY ARE RIGHT THAT WE HAVE TO TAKE INTO ACCOUNT THE COSTS OF TRANSITION. TRANSITIONING TO A CLEAN ENERGY ECONOMY WILL NOT BE EASY. BUT, WE CAN NO LONGER DELAY PUTTING S FRAME WORK FOR A CLEAN ENERGY ECONOMY IN PLACE. THAT NEEDS TO BE DONE NOW. IF BUSINESSES AND ENTREPRENEURS KNOW TODAY WE'RE CLOSING THIS CARBON POLLUTION LOOPHOLE, THEY'LL START INVESTING IN CLEAN ENERGY NOW AND WE'LL SEE MORE COMPANIES CONSTRUCTING SOLAR PANELS AND WORKERS BUILDING WIND TURBINES AND CAR COMPANIES MANUFACTURING FUEL EFFICIENT CARS AND INVESTORS WILL PUT MONEY INTO A NEW ENERGY TECHNOLOGY AND A SMALL BUSINESS WILL OPEN TO START SELLING IT. THAT'S HOW WE CAN GROW THIS ECONOMY,ENHANCE OUR SECURITY AND PROTECT OUR PLANET AT THE SAME TIME.

NOW, THE FOURTH PILLAR OF OUR NEW FOUNDATION IS A 21st CENTURY HEALTH CARE SYSTEM WHERE FAMILY, BUSINESSES AND GOVERNMENT BUDGETS AREN'T DRAGGED DOWN BY SKYROCKETING INSURANCE PREMIUMS. 1.5 MILLION AMERICANS COULD LOSE THEIR HOMES THIS YEAR JUST BECAUSE OF A MEDICAL CRISIS. MAJOR AMERICAN CORPORATIONS ARE STRUGGLING TO COMPETE WITH FOREIGN COUNTERPARTS, SMALL BUSINESSES ARE CLOSING THEIR DOORS, WE CAN'T ALLOW THE COST OF HEALTH CARE TO CONTINUE STRANGLING OUR ECONOMY. THAT'S WHY OUR RECOVERY ACT WILL INVEST IN ELECTRONIC HEALTH RECORDS WITH STRICT PRIVACY STANDARDS THAT CAN SAVE MONEY AND LIVES AND REDUCE MEDICAL ERROR. THAT'S WHY WE MADE THE LARGEST INVESTMENT EVER IN PREVENTIVE CARE BECAUSE THAT'S ONE OF THE BEST WAYS TO KEEP COSTS UNDER CONTROL. INCLUDED IN THE BUDGETS THAT JUST PASSED CONGRESS IS AN HISTORIC COMMITMENT TO REFORM, MAKING QUALITY HEALTH CARE AFFORDABLE FOR EVERY AMERICAN. SO I'M LOOKING FORWARD IN THE NEXT FEW MONTHS TO WORKING WITH BOTH PARTIES IN CONGRESS TO MAKE THIS REFORM A REALITY. WE CAN GET THIS DONE. AND WE HAVE TO GET IT DONE. FIXING OUR HEALTH CARE SYSTEM WILL REQUIRE RESOURCES. IT ISN'T GOING TO BE FREE. IN MY BUDGET WE MADE A COMMITMENT TO FULLY PAY FOR REFORM WITHOUT INCREASING THE DEFICIT. AND WE IDENTIFIED SPECIFIC SAVINGS THAT WILL MAKE THE HEALTH CARE SYSTEM MORE EFFICIENT AND REDUCE COSTS FOR US ALL.

WE HAVE TAKEN AN UNPRECEDENTED EFFORT TO FIND THIS KIND OF SAVINGS IN EVERY CORNER OF THE BUDGET BECAUSE THE FINAL PILLAR IN BUILDING OUR NEW FOUNDATION IS RESTORING FISCAL DISCIPLINE ONCE THIS ECONOMY RECOVERS. ALREADY WE IDENTIFIED $2 TRILLION IN DEFICIT REDUCTIONS OVER THE NEXT DECADE. WE NEED TO DO MORE. WE'VE ALREADY DONE THAT. WE ANNOUNCED REFORM THAT WILL REDUCE NO BID CONTRACTS AND SAVE THE GOVERNMENT $40 BILLION. WE NEED TO DO MORE BUT THAT'S AN IMPORTANT START. SECRETARY GATES RECENTLY ANNOUNCED A COURAGEOUS SET OF REFORMS THAT GO RIGHT AT THE HUNDREDS OF BILLIONS OF DOLLARS IN WASTE AND COST OVERRUNS THAT HAVE BLOATED OUR DEFENSE BUDGET WITHOUT MAKING AMERICA SAFER. WE NEED TO DO MORE BUT THAT PROPOSAL BY SECRETARY GATES IS RIGHT ON TARGET. WE WILL END EDUCATION PROGRAMS THAT DON'T WORK. WE WILL ROOT OUT WASTE AND FRAUD AND ABUSE IN OUR MEDICARE PROGRAM. ALL TOGETHER THIS BUDGET WILL REDUCE DISCRETIONARY SPENDING FOR DOMESTIC PROGRAMS AS A SHARE OF THE ECONOMY BY MORE THAN 10% OVER THE NEXT DECADE. THE LOWEST LEVEL WE'VE SEEN SINCE WE BEGAN KEEPING RECORDS NEARLY HALF A CENTURY AGO. AS WE CONTINUE TO GO THROUGH THE FEDERAL BUDGET LINE BY LINE, WE'LL BE ANNOUNCING ADDITIONAL SAVINGS SECURED BY ELIMINATING AND CONSOLIDATING PROGRAMS WE DON'T NEED TO MAKE ROOM FOR THE THINGS WE DO NEED.

THAT'S WHAT WE'RE DOING NOW. OF COURSE I REALIZE THAT FOR SOME THIS ISN'T ENOUGH. I KNOW THERE IS CRITICISM OUT THERE THAT MY ADMINISTRATION HAS BEEN SPENDING WITH RECKLESS ABANDON. PUSHING A LIBERAL SOCIAL AGENDA WHILE MORTGAGING OUR CHILDREN'S FUTURE. YOU'VE HEARD THE ARGUMENT. LET ME MAKE THREE POINTS.

FIRST, AS I SAID EARLIER, THE WORST THING WE COULD DO IN A RECESSION THIS SEVERE IS TO TRY TO CUT GOVERNMENT SPENDING AT THE SAME TIME AS FAMILIES AND BUSINESSES AROUND THE WORLD ARE CUTTING BACK ON THEIR SPENDING. AS SERIOUS AS OUR EFFORTS ARE, AND THEY ARE SERIOUS, THEY HAVE TO FOCUS ON THE MEDIUM AND LONG-TERM BUDGET PICTURE AND NOT THE SHORT-TERM. THAT'S EXACTLY WHAT WE'VE DONE.

SECOND, IN TACKLING THE DEFICIT ISSUE, WE SIMPLY CANNOT SACRIFICE THE LONG-TERM INVESTMENTS THAT WE SO DESPERATELY NEED TO GENERATE LONG-TERM PROSPERITY. THAT'S THE ARGUMENT THAT SOME CRITICS HAVE MADE. YOU'RE PROPOSING HEALTH CARE REFORM. YOU SHOULDN'T BE DOING THAT. YOU'RE PROPOSING EDUCATION INVESTMENTS. SHOULDN'T BE DOING THAT. THAT ADDS TO THE DEFICIT. JUST AS A CASH STRAPPED FAMILY MAY CUT BACK ON ALL KINDS OF LUXURIES, BUT WILL STILL INSIST ON SPENDING MONEY TO GET THEIR CHILDREN THROUGH COLLEGE, WILL REFUSE TO HAVE KIDS DROP OUT OF COLLEGE AND GO TO WORK IN SOME FAST FOOD PLACE EVEN THOUGH THAT MIGHT BRING IN INCOME IN THE SHORT-TERM BECAUSE THEY ARE THINKING ABOUT LONG-TERM, SO WE AS A COUNTRY HAVE TO MAKE CHOICES WITH AN EYE TO THE FUTURE. IF WE DON'T INVEST NOW IN RENEWABLE ENERGY, IF WE DON'T INVEST NOW IN A SKILLED WORKFORCE, IF WE DON'T INVEST NOW IN A MORE AFFORDABLE HEALTH CARE SYSTEM, THIS ECONOMY SIMPLY WON'T GROW AT THE PACE IT NEEDS TO IN TWO OR FIVE OR TEN YEARS DOWN THE ROAD. IF WE DON'T LAY THIS NEW FOUNDATION NOW, IT WON'T BE LONG BEFORE WE'RE RIGHT BACK WHERE WE ARE TODAY. I CAN ASSURE YOU THAT CHRONICALLY SLOW GROWTH WILL NOT HELP OUR LONG-TERM BUDGET SITUATION. THAT'S THE SECOND POINT.

THIRD POINT, THE PROBLEM WITH OUR DEFICIT AND DEBT IS NOT NEW. IT'S BEEN BUILDING DRAMATICALLY OVER THE PAST EIGHT YEARS. LARGELY BECAUSE BIG TAX CUTS COMBINED WITH INCREASED SPENDING ON TWO WARS AND INCREASED COST OF GOVERNMENT HEALTH CARE PROGRAMS HAVE PUSHED IT EVER UPWARDS. THIS STRUCTURAL GAP IN OUR BUDGET BETWEEN THE AMOUNT OF MONEY COMING IN AND THE AMOUNT OF MONEY THAT'S GOING OUT WILL ONLY GET WORSE AS BABY BOOMERS AGE AND WILL IN FACT LEAD US DOWN AN UNSUSTAINABLE PATH. BUT LET'S NOT KID OURSELVES AND SUGGEST THAT WE CAN SOLVE THIS PROBLEM BY TRIMMING A FEW EARMARKS OR CUTTING THE BUDGET FOR THE NATIONAL ENDOWMENT FOR THE ARTS. THAT'S JUST NOT TRUE. ALONG WITH DEFENSE AND INTEREST ON THE NATIONAL DEBT THE BIGGEST COST DRIVERS IN OUR BUDGET ARE ENTITLEMENT PROGRAMS AND MEDICARE, MEDICAID, AND SOCIAL SECURITY ALL OF WHICH ARE MORE EXPENSIVE EVERY YEAR. IF WE CAN'T TO GET SERIOUS ABOUT FISCAL DISCIPLINE, THEN WE'RE GOING TO NOT ONLY HAVE TO TRIM WASTE OUT OF OUR DISCRETIONARY BUDGET WHICH WE'VE ALREADY BEGUN. WE WILL ALSO HAVE TO GET SERIOUS ABOUT ENTITLEMENT REFORM. NOTHING WILL BE MORE IMPORTANT TO THIS GOAL THAN PASSING HEALTH CARE REFORM THAT BRINGS DOWN COSTS ACROSS THE SYSTEM INCLUDING IN MEDICARE AND MEDICAID. SO MAKE NO MISTAKE, HEALTH CARE REFORM IS ENTITLEMENT REFORM. THAT'S NOT JUST MY OPINION. THAT WAS A CONCLUSION OF A WIDE RANGE OF PARTICIPANTS WE HAD AT THE FISCAL RESPONSIBILITY SUMMIT AT THE WHITE HOUSE THIS YEAR. THAT'S WHY WE NEED TO GET HEALTH CARE DONE THIS YEAR. NOW, ONCE WE TACKLE RISING HEALTH CARE COSTS, WE MUST ALSO WORK TO PUT SOCIAL SECURITY ON FIRMER FOOTING. IT'S TIME FOR BOTH PARTIES TO COME TOGETHER AND FIND A WAY TO KEEP A PROMISE OF A SOUND RETIREMENT FOR FUTURE GENERATIONS AND WE SHOULD RESTORE A SENSE OF FAIRNESS AND BALANCE TO OUR TAX CODE INCLUDING BY SHUTTING DOWN CORPORATE LOOPHOLES AND ENSURING THAT EVERYONE PAYS WHAT THEY OWE. ALL OF THESE EFFORTS WILL REQUIRE TOUGH CHOICES. ALL OF THESE EFFORTS WILL REQUIRE COMPROMISE. BUT THE DIFFICULTY CAN'T SERVE AS AN EXCUSE FOR INACTION. NOT ANYMORE.

THAT BRINGS ME TO ONE FINAL POINT THAT I WOULD LIKE TO MAKE TODAY. I TALKED ABOUT FUNDAMENTAL WEAKNESSES IN OUR ECONOMY THAT LED US TO THIS DAY OF RECKONING. WE ALSO ARRIVED HERE BECAUSE OF A FUNDAMENTAL WEAKNESS IN OUR POLITICAL SYSTEM. FOR TOO LONG, TOO MANY IN WASHINGTON PUT OFF OUR DECISIONS FOR SOME OTHER TIME ON SOME OTHER DAY. THERE'S BEEN A TENDENCY TO SPEND A LOT OF TIME SCORING POLITICAL POINTS INSTEAD OF ROLLING UP SLEEVES TO SOLVE REAL PROBLEMS. THERE'S ALSO AN IMPATIENCE THAT CHARACTERIZES THIS TOWN. AN ATTENTION SPAN THAT'S ONLY GROWN SHORTER WITH THE 24-HOUR NEWS CYCLE THAT INSISTS ON INSTANT GRATIFICATION IN THE FORM OF IMMEDIATE RESULTS OR HIGHER POLL NUMBERS. WHEN A CRISIS HITS, THERE'S ALL TO OFTEN A LURCH FROM SHOCK TO TRANCE WITH EVERYONE RESPONDING TO THE TEMPEST OF THE MOMENT UNTIL THE FUROR HAS DIED DOWN AND THE MEDIA COVERAGE HAS MOVED ON TO SOMETHING ELSE, INSTEAD OF CONFRONTING MAJOR CHALLENGES THAT WILL SHAPE OUR FUTURE IN A SUSTAINED AND FOCUSED WAY. THIS CAN'T BE ONE OF THOSE TIMES. THE CHALLENGES ARE TOO GREAT. THE STAKES ARE TOO HIGH. I KNOW HOW DIFFICULT IT IS FOR MEMBERS OF CONGRESS IN BOTH PARTIES TO GRAPPLE WITH BIG DECISIONS WE FACE NOW. I WOULD LOVE IF THESE PROBLEMS CAME AT US ONE AT A TIME INSTEAD OF FIVE OR SIX AT A TIME. IT'S MORE THAN MOST CONGRESSES AND PRESIDENTS HAVE TO DEAL WITH IN A LIFETIME. WE'VE BEEN CALLED TO GOVERN IN EXTRAORDINARY TIMES. AND THAT REQUIRES AN EXTRAORDINARY SENSE OF RESPONSIBILITY TO OURSELVES, TO THE MEN AND WOMEN THAT SENT US HERE, AND TO THE MANY GENERATIONS WHOSE LIVES WILL BE AFFECTED BY GOOD OR ILL BECAUSE OF WHAT WE DO HERE. THERE'S NO DOUBT THAT TIMES ARE STILL TOUGH. BY NO MEANS ARE WE OUT OF THE WOODS JUST YET. FROM WHERE WE STAND FOR THE VERY FIRST TIME WE'RE BEGINNING TO SEE GLIMMERS OF HOPE. AND BEYOND THAT, WAY OFF IN THE DISTANCE, WE CAN SEE A VISION OF AN AMERICA'S FUTURE THAT'S FAR DIFFERENT THAN OUR TROUBLED ECONOMIC PAST. IT'S AN AMERICAN TEAMING WITH NEW INDUSTRY AND COMMERCE HUMMING WITH NEW ENERGY AND DISCOVERIES THAT LIGHT THE WORLD ONCE MORE. A PLACE WHERE ANYONE FROM ANYWHERE WITH A GOOD IDEA FOR THE WILL TO WORK CAN LIVE THE DREAM THEY'VE HEARD SO MUCH ABOUT. THAT IS THE HOUSE UPON THE ROCK. PROUD. STURDY. UNWAVERING IN THE FACE OF STORMS. WE WON'T FINISH IT IN ONE YEAR. WE WON'T FINISH IT IN MANY. IF WE USE THIS MOMENT TO LAY THAT NEW FOUNDATION AND COME TOGETHER AND BEGIN THE HARD WORK OF REBUILDING AND IF WE PERSIST AGAINST DISAPPOINTMENTS AND SETBACKS THAT WILL SURELY LIE AHEAD, THEN I HAVE NO DOUBT THAT THIS HOUSE WILL STAND AND THE DREAM OF OUR FOUNDERS WILL LIVE ON IN OUR TIME. THANK YOU. GOD BLESS YOU. GOD BLESS THE UNITED STATES OF AMERICA.

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