Obama, Bush Work on Struggling Economy

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WASHINGTON - Both President-elect Barack Obama and President George W. Bush are focused on new measures to help the economy. 

Also today there's more evidence that the U.S. is in a recession. The government reported that the gross domestic product shrank at an annual rate of 0.5 percent in the third quarter.

What's the Government to Do?

At his second news conference in two days, the President-elect is seeking to assure nervous Americans he'll do whatever it takes - spend whatever it takes - to break the back of this recession.

"We have a consensus, which is pretty rare, between conservative economists and liberal economists, that we need a big stimulus package that will jolt the economy back into shape," Obama said in a Monday press conference.

In fact, he says he wants Congress to have a package ready for him to sign the day he moves into the White House.

And he's announced an economic team in record time, with such soothing superstars as Tim Geithner to head Treasury and Larry Summers to head the National Economic Council.

Sam Stovall is the chief investment strategist at the Standard and Poor's equity research services in New York.

"I think the President-elect is getting the message that the market is worried that if you wait too long the economy will have fallen too far to really recover," he said.

But the costs will be staggering. Bloomberg News estimates that just the plans laid out so far could cost $7.7 trillion. The deficit in 2009 alone might well hit $1 trillion.

Lending Creditors a Hand

And the Treasury has thrown in another twist: using some of the $700 billion Congress has already ok'd, for a new purpose - to help lenders finance credit card, auto and student loans.

In a surprise move today to help the ailing housing industry, the Fed said it will buy up to $600 billion in mortgage-backed assets./span>

And after pumping $20 billion more into flailing Citigroup, President George Bush let it be known that even more rescue packages may well be on the way.

"And if need be, we're going to make these kind of decisions to safeguard our financial system in the future," Bush said.

Defending all the billions for bailouts, the President says he's been warned the economy could spiral into a downturn even worse than the Great Depression unless government acts aggressively.

The Citigroup Controversy

But people are divided about rescuing financiers like Citigroup, who've made bad investments, but are so vital to the economic system.

"People know what's going on right now, nothing looking good on the whole economic side, so I think we need to go ahead a bail them out. I don't know where it stops. I don't know where it ends, but Citigroup's a big group," said Voxpop's Ed Trainor.

But Voxpop's Sally Brandon said, "I would let them go. I mean bad management again is the reason why they're in this position and there's not enough protection for the general public."

But good idea or bad, the bailout seemed to be part of the reason the stock market bounced back so powerfully Friday and Monday.

"Clearly this was the news that was the catalyst for this market today. Everything else just rallied with it," New York Stock Exchange trader Jonathan Corpina said.

Stovall said, "Well I think that the market just got oversold on Thursday, November 20, and like a rubber band that's stretched too far it snapped back on Friday and Monday. Now the real question is, is it the beginning of a new bull market or simply a rally within a bear market? And I think only time will tell."

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CBN News
Paul Strand

Paul Strand

CBN News Sr. Washington Correspondent

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