GIGANTIC HEAVY LIFTER! (ALL HANDS on DECK)

Excerpts ■ Video and full transcript at freep.com

Obama sees incentives as key to lifting economic crisis

President Barack Obama met with Justin Hyde of the Free Press Washington Bureau and Richard Wolf of USA To day on Thursday at the White House. Here are excerpts from the interview. For the full tran script or to watch video of the interview, go to freep.com.

QUESTION: (Can you) start us off by telling us what’s your greatest fear and your greatest hope in terms of where the job situ ation goes from here, say, for the next six to 12 months.

OBAMA:  Well, let me pro vide a context for where we are. Because of the financial crisis we were hemorrhaging jobs at the beginning of the year — 700,000 jobs per month in the first quarter of this year.

Our first job was to make sure that you didn’t have a complete financial meltdown.

We’ve succeeded in that. Our second job was to limit the damage from the financial crisis on Main Street — and what that meant was a recov ery act that would help states not have to lay off police and firefighters and teachers, all of which would have a broad er effect on the economy. We passed a tax cut to put more money into people’s pockets, 95% of workers.

Those kinds of steps … all designed to keep demand up for basic consumer goods, help people and states. And as a consequence … we have been able to get lending flow ing again to some degree, and we’re starting to see econom ic growth for the first time in a year. … But frankly, the steep de cline in jobs was a lot worse than any economist modeled at the beginning of the year.

And so now you’ve got essen tially a 7 million to 8 million gap between where jobs should be for relatively full employment and where we are.

That is my greatest fear, is we don’t close that gap.

QUESTION: How can you craft a program large enough to help the millions of Americans who are un employed without … addi tional deficit spending?

OBAMA: Moving forward, it is not going to be possible for us to have a huge second stimulus because, frankly, we just don’t have the money. It is possible for us to, I think, be surgical and say, are there ways that public dollars can be leveraged into greater private spending? … We have been exploring the ways that we can use the need to retrofit and weather ize homes to drive down ener gy costs to create a version of — you know, similar to what we did with cash for clunkers, where we essentially say to the private sector — the Home Depots and the Lowe’s — let’s see if we can incentiv ize people to insulate their homes and get contractors working again, and suddenly generate more private activ ity.

… On the jobs front more directly, there are a range of ideas that are being looked at on tax credits that could tip an employer who is on the fence — they see that there’s some business to be had out there but they’re not quite sure yet whether they want to spend the money. It’s possible that a little bit of a nudge from a tax break could make the difference.

QUESTION: Are banks doing enough at this point to extend credit to small business, or should they be freeing up more credit? Is there anything the adminis tration can do along those lines, given that you don’t necessarily have the power that you had earlier this year?

OBAMA:  Well, we have taken a series of significant steps to try to increase small-business lending. We’ve increased, for example, the Small Business Administration loans by 73% since we came in. We’re ex ploring further ways that can loosen up credit. … Small businesses, mom and- pop businesses, often who are more reliant on small banks, they’re having some tough problems. And I think that there’s a perception that it was just the big banks that were in trouble, not the small banks. The truth is, the com munity banks, the local banks, they were very involved in commercial real estate. That is a problem that is actually still there, it has not bottomed out, and was in some ways just as significant, although not as large, as the housing market problem. … And so what we’re trying to figure is how do you, on the one hand, help make sure that the banks, both large and small, are engaging in pru dent practices, but on the other hand, that they’re not pulling back so much that businesses can’t get credit, and where can we strate gically fill the gaps? … And I’ll be very honest with you, the TARP funding, which could give beneficial rates to banks that they could then in turn lend, carries with it for a lot of banks the unattractive prospect of the government being involved in their com pensation. … You had a lot of banks saying we don’t want to take any TARP money or we want to pay it back as soon as possible. And that gives us less leverage over these banks than we might otherwise like.

But I am convinced that the banks can be doing more than they’re doing, and I think that it’s important for them to understand the American people stepped up when they made some very bad calls and pulled them out of a very, very bad situation. They have to feel some sense as well that it’s time for them to give back. And so we’re going to be pushing them pretty hard in the months to come.

QUESTION: Michigan has led the nation in unemploy ment for nearly four years now. In parts of Detroit, the unemployment rate is one in three workers. What do you say to people who are coming up now on a year without having work?

OBAMA:  Well, the first thing I’d say is I am painfully aware of how tough the situation is. … Michelle and I have family members who are out of work. It hasn’t been that long since I was in some of the neighborhoods that are going through these tough times.

And we know the desperation and difficulty that people are feeling, as well as the pride and dignity that work brings, and the fact that they don’t want a handout … they want to be given a chance to sup port their families and do better in their lives.

We have taken a series of steps that have made a bad situation somewhat better. I mean, had we not passed the Recovery Act, had we not stepped in on GM and Chrys­ler, things obviously would be a lot worse. But that’s not good enough. And so the steps that I’ve talked about, in terms of short-term job stimulus, is going to be im­portant.

I think the most important message I can deliver to the people in Michigan though is that we will get through this short-term transition, and what we have to be doing is taking advantage of the long term opportunities around areas like clean energy. And Gov. Granholm has done a very good job, I think, pro moting things like new bat tery technologies for the fu ture electric car, making sure that we are thinking cre atively about how to convert all this enormous capacity, manufacturing capacity, that existed because of the auto industry, into these new areas of clean energy.

QUESTION: Yesterday, the Congressional Black Cau cus held a protest in the House committee for what they said was an avoidance of the problems of black Americans who are facing the brunt of the recession, while policy has been, in their words, “defined by the world view of Wall Street.”

What’s your response to that criticism?

OBAMA:  I think the most important thing I can do for the African-American com munity is the same thing I can do for the American commu nity, period, and that is get the economy going again and get people hiring again. And I think it’s a mistake to start thinking in terms of partic ular ethnic segments of the United States rather than to think that we are all in this together and we’re all going to get out of it together.

QUESTION: A lot of people say we’re going to need to do something to fix the state budgets, which are going into 2011, whereas the stimulus money runs out in 2010. Can you put strings on the type of aid that might turn out to be part of this … so that you don’t have governors, perhaps Republican governors, cut ting taxes with that money or something like that?

OBAMA:  We are going to do everything we can to make sure that any federal aid that’s provided to the states is actually helping people in those states who are in des­perate straits. … Let me just make one last point. … We are going through the worst economic crisis since the Great Depres sion. I want people to un derstand that it is an extraor dinary feat — not just of gov ernment, but I think the en tire country — that as tough of a blow as this was, we’ve stayed on our feet. We have managed through this crisis in a way that a lot of people were fearful we couldn’t do.

And we should take confi dence from that. We should take pride in that. We’ve still got a long way to go, espe cially on the jobs front.

But the truth of the matter is, is that this economy is on the upswing.

We remain the most dy namic economy on Earth, the best universities on Earth, the best science and technology on Earth, the most productive workers around. And if we can get some key things right on energy, stop having health care be such a drag on our economy, make sure that our education system is working the way it needs to, get con trol of our federal budget as we recover — if we can take those key structural steps, I am absolutely confident that we will bounce back just like we always have before. But it’s going to take some work, and it’s going to take some time. And it’s going to require some patience on the part of the American people.