President Obama warned Tuesday that times are "still tough" despite some signs of improvement, saying the U.S. economy must be rebuilt from the ground up to avoid the mistakes of the past.
In a speech at Georgetown University, the president sought to reassure those critics who said his administration was trying to do too much, and those who complained it was not doing enough. He said it was important that the economy be rebuilt not "on the same pile of sand", but on "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 home and send more exports abroad."
"There is no doubt that times are still tough," he said, but "for the very first time, we are beginning to see glimmers of hope."
The president's message came on the same day the economic data seemed to contradict his recent hopeful talk that the economy may be in the first stages of a turnaround.
Retail sales fell again in March after increasing the previous two months. Sales dropped 1.1 percent, the Commerce Department said in a report released Tuesday — far weaker than the 0.3 percent increase expected by analysts. In a separate report, the Commerce Department said business inventories fell for a sixth straight month in February. The 1.3 percent decline matched the January drop.
Obama acknowledged that his administration had been assailed from both the left and the right about the handling of the economic crisis. Increased spending in the short term was necessary to keep the economy from plummeting further, he said.
"I absolutely agree that our long-term deficit is a major problem that we have to fix," he said, adding that "the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs — not to stand idly by as the economy goes into free-fall."
But the president also tried to answer critics, many in his own party, who have called for the government to preemptively take over failing banks and financial institutions.
"We believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end ... and [are] more likely to undermine than to create confidence," he said.
The 21st century economy must be built on a new foundation that includes reform of outdated financial regulations, a highly educated work force and renewable energy, the president said.
He called for "rules that protect typical American families when they buy a home, get a credit card or invest in a 401(k)," adding that Congress had already begun to work on such regulations, which he hoped would reach his desk before the end of the year.
"In this new economy, we trail the world's leaders in graduation rates and achievement," Obama said, pledging that "by 2020, America will once more have the highest proportion of college graduates in the world."
The president also said the U.S. needs to lead the world in renewable energy technologies that will create millions of new jobs and result in a nation "humming with new energy and discoveries that light the world once more."
Obama's comments came on the same day Federal Reserve Chairman Ben Bernanke said there have been "tentative signs" that the recession may be easing. But he also warned that any hope for a lasting recovery hinges on the government's success in stabilizing shaky financial markets and getting credit to flow more freely again.
In remarks prepared for students and faculty at Morehouse College in Atlanta, Bernanke mentioned improvements in recent data on home and auto sales, home building and consumer spending as flickering signs of encouragement. But his speech was prepared before the retail sales and other data were released.
"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing," Bernanke said. "A leveling out of economic activity is the first step toward recovery. To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets."
Seasonal adjustments could partly explain the unexpectedly weak showing for retail sales. The March 2008 performance was boosted by an early Easter, while the holiday this year did not occur until April, delaying some shopping.