Barack Obama on Budget & Economy Junior Senator (IL); President-Elect

Sub-sections under Budget & Economy:
• Financial Bailout
• Voting Record
• Other issues under Budget & Economy

Make government fiscally responsible & live within budget

OBAMA: Every dollar I’ve proposed, I’ve proposed an additional cut hat it matches. To give an example, we spend $15 billion a year on subsidies to insurance companies. It doesn’t help seniors get better. It’s a giveaway. I want to go through the federal budget line by line, programs that don’t work, we cut. Programs we need, we should make them work better. Once we get through this economic crisis, we’re going to have to embrace a culture of responsibility, all of us, corporations, the federal government, & individuals who may be living beyond their means.

McCAIN: I’d have an across-the-board spending freeze. I know how to save billions of dollars in defense spending. One would be the marketing assistance program. Another one would be subsidies for ethanol. I would fight for a line-item veto, and I would certainly veto every earmark pork-barrel bill.

When Bush came in, we had a surplus; now we have a deficit

OBAMA: I understand your frustration and your cynicism. Most of the people here, you’ve got a family budget. If less money is coming in, you end up making cuts. Maybe you don’t go out to dinner as much. Maybe you put off buying a new car. That’s not what happens in Washington. And you’re right. There is a lot of blame to go around.

But I think it’s important just to remember a little bit of history. When George Bush came into office, we had surpluses. And now we have half-a-trillion-dollar deficit annually. When George Bush came into office, our national debt was around $5 trillion. It’s now over $10 trillion. We’ve almost doubled it.

And so while it’s true that nobody’s completely innocent here, we have had over the last 8 years the biggest increases in deficit spending and national debt in our history. And Sen. McCain voted for 4 out of 5 of those George Bush budgets.

Middle class needs a rescue package with tax cuts

OBAMA: This is a verdict on the failed policies of the last eight years that said that we should strip away consumer protections, let the market run wild, and prosperity would rain down. Step one was a rescue package that means making sure taxpayers get their money back. The middle-class need a rescue package. That means tax cuts for the middle-class. It means help for homeowners. It means we are helping state governments set up projects that keep people in their jobs. We’ve got to fix our health care system, we’ve got to fix our energy system. You’ve got to have somebody in Washington who is thinking about the middle class and not just those who can afford to hire lobbyists.

McCAIN: I have a plan to fix this problem and it has to do with energy independence. We’ve got to stop sending $700 billion a year to countries that don’t like us. We have to keep Americans’ taxes low. All Americans’ taxes low.

Bailout will unfreeze credit & allow businesses to function

OBAMA: Let me tell you what’s in the rescue package for you. Right now, the credit markets are frozen up and what that means is that small businesses can’t get loans. If they can’t get a loan, that means that they can’t make payroll. If they can’t make payroll, then they may end up having to shut their doors and lay people off. And if you imagine just one company trying to deal with that, now imagine a million companies all across the country. So it could end up having an adverse effect on everybody, and that’s why we had to take action. But we shouldn’t have been there in the first place.

McCAIN: This rescue package means we will stabilize markets, we will shore up these institutions. But it’s not enough. That’s why we’re going to have to go out into the housing market and buy up these bad loans and we’re going to have to stabilize home values, and that way, Americans can realize the American dream and stay in their home.

Every citizen should save energy & resources

OBAMA: Each and every one of us can start thinking about how can we save energy. And one of the things I want to do is make sure we’re providing incentives so that you can buy a fuel efficient car that’s made right here in the U.S., not in Japan or South Korea, making sure that you are able to weatherize your home or make your business more fuel efficient.

McCAIN: Some of those programs may not grow as much as we would like for them to, but we can establish priorities with full consultation, not done behind closed doors & shoving earmarks in the middle of the night that we don’t even know about until months later.

FactCheck: National debt up from $6T to $10T under Bush

Bottom-up economics instead of trickle-down economics

Obama believes that all will benefit from the system he envisions, that Wall Street & Main Street are intertwined, that you can't have successful securities investing without successful companies to invest in, and you can't have successful companies without motivated engaged workers

Focus on economic justice instead of macroeconomic policy

These words are from Barack Obama's major economic policy speech on Feb. 13, 2008. It had a completely different focus than the macroeconomic issues we are used to hearing discussed in Washington. Rather, he focused his remarks on what, for him, is the most pressing need today in America, the need for economic justice. To a great degree, much of Barack Obama's platform for America is about a singular issue, economic justice.

We need both bottom-up politics and bottom-up economics

All are equally motivated to excel, because they know the system will treat them fairly and reward their hard work and effort.

Obama wrote, "It taught me that ordinary people can do extraordinary things when given the chance. Change does not happen from the top down, but from the bottom-up, because the American people stand ready for change. Just like we need bottom-up politics, we need bottom-up economics. We need to think about working people."

OpEd: "Hope" translates into economic opportunity

Many of us remember these striking words as the keynote speaker at the 2004 Democratic Nominating Convention. If there is one word associated with Barack Obama, from all of his campaigns, speeches and books, it would have to be hope. From an economic perspective, the word hope easily translates into economic opportunity. Without economic opportunity, there is no hope.

Clinton left behind a surplus; Bush squandered it

Worse yet, the price-tag for these failures is being passe to our children. The Clinton Administration left behind a surplus, but this Administration squandered it. We face budget deficits in the hundreds of billions and our nearly ten trillion dollars in debt. We’ve borrowed billions from countries like China to finance needless tax cuts for the wealthiest Americans and an unnecessary war, and yet Sen. McCain is explicitly running to continue and expand these policies, without a realistic plan to pay for it. I want to take us in a new and better direction.

A different economic approach vs. McCain’s 4 more years

A: If they have a 401(k), then they are going to see those taxes deferred, and they’re going to pay ordinary income when they finally cash out. So, that’s a phony argument. You know, as I travel around the country, what I’m absolutely convinced of is that people recognize that if only 1% of the population is doing well, when we’ve got wage and incomes for the average worker actually going down during a period of economic expansion, much less economic recession, that something’s being mismanaged. And they want a different approach. And that’s what we’re going to be offering them. John McCain is essentially offering four more years of the same policies that got us into this rut that we’re in now.

Can’t do anything at home with $12 billion a month on Iraq

Protect consumers with Credit Card Bill of Rights

• Create a Credit Card Rating System to Improve Disclosure:Provide consumers an easily identifiable 1-star to 5-star ranking of credit cards, based on the card’s features. Credit card companies will be required to display the rating on all application and contract materials.
• Establish a Credit Card Bill of Rights to Protect Consumers:Obama will create a Credit Card Bill of Rights to protect consumers. The Obama plan will:
  • Ban Unilateral Changes
  • Apply Interest Rate Increases Only to Future Debt
  • Prohibit Interest on Fees
  • Prohibit “Universal Defaults”
  • Require Prompt and Fair Crediting of Cardholder Payments
• Cap Outlandish Interest Rates on Payday Loans and Improve Disclosure:Obama supports extending a 36% interest cap to all Americans. Obama will require lenders to provide clear and simplified information about loan fees, payments and penalties, and he’ll require them to provide this information during the application process.

Bush stimulus plan leaves out seniors & unemployed

Account for every single dollar for new proposed programs

A: We account for every single dollar that we propose. This is one of the things that’s happened during the course of this campaign, that there’s a set of assertions made b Clinton and her husband, that are not factually accurate. Part of what the people are looking for right now is somebody who’s going to solve problems and not resort to the same typical politics that we’ve seen in Washington. That is something that I hear all across the country. So when Clinton says I wasn’t opposed to the war from the start or says it’s a fairytale that I opposed the war, that is simply not true. Clinton asserts that I said that the Republicans had better economic policies since 1980. That is not the case. The viewers are concerned about is who’s actually going to help the get health care, how are they going to get their kids going to college, and that’s the kind of campaign I’ve tried to run.

Bankruptcy bill pushed by banks & financial institutions

CLINTON: I regretted voting for the bankruptcy bill and I was happy that it didn’t get into law. By 2005, there was another run at a bankruptcy reform, motivated by the credit card companies and the other big lenders. I opposed that bill. There was a particular amendment that is very telling. It was an amendment to prohibit credit card companies from charging more than 30% interest. It was one of the biggest lobbyist victories on that very bad bill that the bankruptcy bill represented.

Lack of an energy policy is a financial burden

Release people in bankruptcy due to health care problems

Bush & GOP dug budget hole; need years to dig out

A: Over the last seven years, what we’ve seen is an economy that’s out of balance because of the policies of George Bush and the Republicans in Congress. Not only do we have fiscal problems, but we’ve got growing inequality. People are working harder for less and they’re seeing costs go up. So what I want to do is get the long-term fundamentals right. That means that we are investing in education & infrastructure, structuring fair trade deals, and also ending the war in Iraq. That is money that can be applied at home for critical issues.

Q: So a priority to balance the federal budget, or not?

A: We are not going to be able to dig ourselves out of that hole in 1 or 2 years. But if we can get on a path of sustained growth, end the war in Iraq, end some of the special interest loopholes and earmarks that have been clogging up the system, then I think we can return to a path of a balanced budget.

Save $150 billion in tax cuts for people who don’t need them

Take China “to the mat” about currency manipulation

A: We have legislation that says that if, in fact, they are manipulating their currency--and I think there’s no dispute that they are--that we need to take strong action. It’s in the Banking Committee. I will say that it’s actually a blunt tool. I’d prefer not doing this legislatively. The problem is we’ve had a president that has shown no leadership on it. So when I am in the White House, I will meet directly with the Chinese leadership and indicate we have to restore balance. And, by the way, we have to mobilize our allies, such as the European Union, to have that conversation with us. This is an imbalance that is not good for any economy over time. It’s not sustainable, the trade imbalances that we have.

Rejects free market vision of government

Return to PayGo: compensate for all new spending

The result is the most precarious budget situation we have seen in years. We now have an annual budget deficit of almost $300 billion, not counting more than $180 billion we borrow every year from the Social Security Trust Fund.

It is not the debt that is most troubling. The bulk of the debt is a direct result of the President’s tax cuts, 47.4% of which went to the top 5% income bracket.

We can eliminate tax credits that have outlived their usefulness & close loopholes that let corporations get away without paying taxes. We can restore a law that was in place during the Clinton presidency--called Paygo--that prohibits money from leaving the treasury without some way of compensating for the lost revenue.

Bush’s economic policies are not working

Supports federal programs to protect rural economy

US will emerge from this recession, stronger than before

But while our economy may be weakened and our confidence shaken, though we are living through difficult and uncertain times, tonight I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before.

The answers to our problems don't lie beyond our reach. They exist in our laboratories and our universities; in our fields and our factories; in the imaginations of our entrepreneurs. What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.

Fundamentals were weak BEFORE crisis; focus on middle class

McCAIN: Americans are hurting right now, and they’re angry. They’re innocent victims of greed and excess on Wall Street and as well as Washington, D.C. But we also have to have a short-term fix, in my view, and long- term fixes [as you outlined about my plan].

Q: Sen. Obama, you proposed $60 billion in tax cuts for middle- income and lower-income people, more tax breaks to create jobs, new spending for public works projects to create jobs.

OBAMA: The fundamentals of the economy were weak even before this latest crisis. Sen. McCain and I agree that we’ve got to help homeowners. I disagree with Sen. McCain in how to do it, because the way Sen. McCain has designed his plan, it could be a giveaway to banks if we’re buying full price for mortgages that now are worth a lot less.

Not enough to help those at the top: it doesn’t trickle down

OBAMA: It’s not enough just to help those at the top. Prosperity is not just going to trickle down. We’ve got to help the middle class. Part of the problem is that for many of you, wages and incomes have flat-lined. For many of you, it is getting harder and harder to save, harder and harder to retire. Sen. McCain is right that we’ve got to stabilize housing prices. But underlying that is loss of jobs and loss of income. That’s something that the next treasury secretary is going to have to work on.

McCAIN: We obviously have to stop this spending spree that’s going on in Washington. Do you know that we’ve laid a $10 trillion debt on young Americans, $500 billion of it we owe to China? We’ve got to have a package of reforms and it has got to lead to reform prosperity and peace in the world. And I think that this problem has become so severe, that we’re going to have to do something about home values.

I sought re-regulation; McCain boasts he’s a deregulator

OBAMA: I’ve got to correct a little bit of Sen. McCain’s history. Let’s, first of all, understand that the biggest problem in this whole process was the deregulation of the financial system. Sen. McCain, as recently as March, bragged about the fact that he is a deregulator. On the other hand, two years ago, I said that we’ve got a sub-prime lending crisis that has to be dealt with. I wrote to Secretary Paulson, I wrote to Federal Reserve Chairman Bernanke, and told them this is something we have to deal with, and nobody did anything about it. A year ago, I went to Wall Street and said we’ve got to reregulate, and nothing happened. And Sen. McCain during that period said that we should keep on deregulating because that’s how the free enterprise system works.

We’re in the worst financial crisis since Great Depression

A: We are going through the worst financial crisis since the Great Depression. As we engage in this important rescue effort, we’ve got to make sure that we’ve got oversight over this whole process. $700 billion, potentially, is a lot of money. We’ve got to make sure that taxpayers have the possibility of getting that money back--and gains--if & when the market returns. We’ve got to make sure none of that money is going to pad CEO bank accounts or t promote golden parachutes. We’ve got to make sure we’re helping homeowners, because the root problem has to do with the foreclosures taking place all across the country. This is a final verdict on 8 years of failed economic policies--a theory that says w can shred regulations & consumer protections and give more to the most, and somehow prosperity will trickle down. It hasn’t worked. The fundamentals of the economy have to be measured by whether or not the middle class is getting a fair shake.

The lax regulation that Bush favored got us in this disaster

A: We haven’t seen the language yet, & there’s constructive work being done. I am optimistic about the capacity of us to come together with a plan. But how did we get into this situation in the first place? Two years ago, I warned that because of the subprime lending mess, because of lax regulation, that we were potentially going to have a problem & tried to stop some of the abuses in mortgages that were taking place at the time. Last year, I wrote to the secretary of the Treasury to make sure that he understood the magnitude of this problem and to call on him to bring all the stakeholders together to try to deal with it. We’ve have to intervene to solve this problem short-term. But we’re also going to have to look at how is it that we’ve shredded some many regulations, we did not set up a 21st century regulatory framework to deal with these problems. And that, in part, has to do with an economic philosophy that says regulation is always bad.

Pay attention to Main Street, not just Wall Street

McCAIN: We’ve got fundamental problems in the system. And Main Street is paying a penalty for the excesses and greed in Washington, DC, and in the Wall Street. There’s no doubt that we have a long way to go, and obviously stricter interpretation and consolidation of the various regulatory agencies that weren’t doing their job that has brought on this crisis. But I have a fundamental belief in the goodness and strength of the American worker. And the American worker is the most productive, the most innovative.

Decide financial rescue plan on future slower tax revenues

A: There are a range of things that are probably going to have to be delayed. We don’t yet know what our tax revenues are going to be. The economy is slowing down. So it’s hard to anticipate right now what the budget’s going to look like next year. But there’s no doubt that we’re not going to be able to do everything that needs to be done.

Spending freeze is like a hatchet where you need a scalpel

McCAIN: How about a spending freeze on everything but Defense, Veterans Affairs and entitlement programs? We ought to seriously consider, with the exceptions of caring for our veterans, national defense and several other vital issues.

OBAMA: The problem with a spending freeze is you’re using a hatchet where you need a scalpel. There are some programs that are very important that are currently underfunded. I want to increase early childhood education. We’re currently spending $10 billion a month in Iraq when they have a $79 billion surplus. It seems to me that if we’re going to be strong at home as well as strong abroad, that we’ve got to look at bringing that war to a close.

Free market needs proper government oversight

Obama's overall economic philosophy: He understands the power of the free market to create jobs and encourage creativity, but he also understands that, left to its own devices, without proper government oversight, it has a way of bouncing wildly between booms and busts. Individual participants in a market economy can do little to influence the overall stability of the system, but government can, and must, act to assure our financial markets remain strong and stable.

Prosecute mortgager fraud; require full mortgage disclosure

• Protect homeownership and crack down on mortgage fraud: Obama will make sure homebuyers have honest and complete information about their mortgage options.
• Ensure more accountability in the subprime mortgage industry: Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal fraud penalties for mortgage professionals, and requires industry insiders to report suspicious activity.
• Mandate accurate loan disclosure: Obama will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric for home mortgages.
• Close bankruptcy loophole for mortgage companies: Obama will eliminate the provision that prevents bankruptcy courts from modifying an individual's mortgage payment.

Latinos & blacks are hardest hit by housing & gas crises

More accountability in subprime mortgages

• Ensure More Accountability in the Subprime Mortgage Industry:Obama introduced comprehensive legislation over a year ago to protect consumers against abusive lending practices. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for law enforcement, and creates new criminal penalties for mortgage fraud.
• Create a Universal Mortgage Credit:Obama will create a 10% universal mortgage credit to provide tax relief to homeowners who do not itemize. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.
• Mandate Accurate Loan Disclosure: Obama will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

Help the homeowners actually living in their homes

Capping credit card interest rates at 30% is not enough

Accountability and oversight over the financial markets

Modify some of the fraudulent & predatory lending practices

Regulate financial instruments to protect home mortgages

DODD: Yes, but we also need more liquidity in the market. It has seized up. You can’t get a mortgage in America today.

OBAMA: We do need more liquidity, but we’re going to have to not only help home owners who are going to be losing their homes as a consequence of this; we’re going to have to make sure that we’ve got the kinds of tough regulation when it comes to financial instruments to make sure that people who have saved and are trying to get their own home for the first time are not hoodwinked out of it. And, unfortunately, the reason that we haven’t had tougher regulation in part goes back to the issue of lobbying. This is where special interests have been driving the agenda. We have not had the kinds of consumer protections that are in place. That’s why, when we have this debate about lobbying, we have to remind ourselves it has very real consequences.

Government regulation needed for when markets fail

Voted against limiting credit to 30%, because 30% too high

Obama did vote against--and Clinton voted for--an amendment that would have placed a 30% cap on the interest rate that could be charged on any extension of credit. The amendment failed by a vote of 74 to 24 in 2005. When the amendment came up for a vote, Obama was standing next to Sen. Paul Sarbanes, D-MD, the senior Democrat on the banking committee and the leader of those opposing the landmark bill, which would make it harder for Americans to get rid of debt.

As for whether the 30% cap was too high, that’s certainly a matter of opinion. Sen. Mark Dayton of Minnesota, sponsor of the amendment, said on the Senate floor that such a cap “is still consumer abuse” but is much better than rates of more than 300%, which he said were being charged by some loan operations in the country.

I opposed both the 2001 and 2005 bankruptcy bills

Voted NO on paying down federal debt by rating programs' effectiveness.

Proponents recommend voting YES because:

My amendment says we are going to take about $18 billion as a strong signal from the Congress that we want to support effective programs and we want the taxpayer dollars spent in a responsible way. My amendment doesn't take all of the $88 billion for the programs found by PART, realizing there may be points in time when another program is not meeting its goals and needs more money. So that flexibility is allowed in this particular amendment. It doesn't target any specific program. Almost worse than being rated ineffective, we have programs out there that have made absolutely no effort at all to measure their results. I believe these are the worst offenders. In the following years, I hope Congress will look at those programs to create accountability.

Opponents recommend voting NO because:

The effect of this amendment will simply be to cut domestic discretionary spending $18 billion. Understand the programs that have been identified in the PART program are results not proven. Here are programs affected: Border Patrol, Coast Guard search and rescue, high-intensity drug trafficking areas, LIHEAP, rural education, child abuse prevention, and treatment. If there is a problem in those programs, they ought to be fixed. We ought not to be cutting Border Patrol, Coast Guard search and rescue, high-intensity drug trafficking areas, LIHEAP, rural education, and the rest. I urge a "no" vote.

Voted NO on $40B in reduced federal overall spending.

Get minorities into home ownership & global marketplace.

The CBC is focused on economic empowerment issues including:
• New Markets and Small and Minority Business Development. The CBC will seek to increase opportunities for minority and small and disadvantaged businesses by expanding contracting opportunities in the public and private sectors, increasing access to capital, creating tax incentives for capital improvements, removing outdated and restrictive regulatory barriers, and streamlining and enhancing procurement tools to encourage minority and small business utilization.
• Trade and Global Economic Empowerment. The CBC will work to ensure that the benefits of the dynamic global marketplace extend to minority businesses, and Africa and developing countries. To this end, the CBC will propose and support trade and investment initiatives designed to bridge the global digital divide, create jobs, improve infrastructure, promote sustainable development, and raise living and work standards for people of color around the globe. Moreover, the CBC will work to ensure that America’s international trade agenda and priorities also meet these goals.
• Increasing Affordable Housing Opportunities. The CBC’s goal is to increase the nation’s homeownership rates. Home ownership is one of the best wealth creation vehicles for minority families. We will work with lending institutions and community organizations to ensure that minorities are afforded every opportunity to realize the dream of owning a home.

Require full disclosure about subprime mortgages.

Sen. DODD: Today we are facing a crisis in the mortgage markets on a scale that has not been seen since the Great Depression: over 2 million homeowners face foreclosure at a loss of over $160 billion in hard-earned home equity; over one out of every 5 subprime loans is currently delinquent. These high default rates have frozen the subprime and jumbo mortgage markets and infected the capital markets to the point where central banks around the world have had to inject liquidity into the system to avoid the crisis from spreading to other segments of the market.

One of the fundamental causes of this serious crisis is abusive and predatory subprime mortgage lending. The Homeownership Preservation and Protection Act of 2007 is designed to protect American homeowners from these practices, and prevent this disaster from happening again. The legislation will:

• realign the interests of the mortgage industry with borrowers to insure the availability of mortgage capital on fair terms both for the creation and sustainability of homeownership;
• establish new lending standards to ensure that loans are affordable and fair, and
• provide for adequate remedies to make sure the standards are met; and create a transparent set of rules for the mortgage industry so that capital can safely return to the market without bad lending practices driving out the good.

In the coming months, the housing crisis is going to get worse. We will need to continue to press lenders and servicers to provide real relief for homeowners threatened with foreclosure.

Reform mortgage rules to prevent foreclosure & bankruptcy.

• Foreclosure Prevention Act of 2008 - refinance mortgages originally financed through a qualified subprime loan.
• Makes FY2008 appropriations for emergency needs of states and local governments to redevelop abandoned and foreclosed homes; and the Neighborhood Reinvestment Corporation for foreclosure mitigation activities.
• Helping Families Save Their Homes in Bankruptcy Act of 2008 - Authorizes a bankruptcy plan for individuals with regular income to provide for payment of such claim for a period of up to 30 years. Creates a principal residence homestead exemption for debtors over 55 years of age.
• Mortgage Disclosure Improvement Act of 2008 - Amends the Truth in Lending Act to set forth additional disclosure requirements governing any extensions of credit (not only mortgages) secured by the dwelling of a consumer.