Some market observers are concerned that the Obama administration has elected to scare the American public into accepting the hefty economic stimulus package rather than work hard to restore the country's confidence first.
In an op-ed piece printed in
The Washington Post
Thursday, President Barack Obama argued that "each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes."
Adding to the urgency of the crisis, Obama wrote that if nothing is done, "this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."
Some wonder, though, whether Obama and Democratic members of Congress are pushing for too much, too fast. Their argument is that, much like the Troubled Asset Relief Program, or TARP, Democratic politicians are bullying GOP members in order to get spending initiatives into the program, all while touting the bipartisanship of the debates. Instead, market observers say, the administration should work on restoring confidence to consumers and the financial system.
"It's almost like the same scare tactics used with the original TARP funds," said Matthew Smith, president of Smith Affiliated Capital. "Basically, they're saying that if we don't do this, the market will fall apart. The country will fall apart. It's as though the Democrats are trying to turn the Republican's constituencies against them."
James Paulsen, chief investment strategist with Wells Capital Management, said that the Obama administration's choice to act more quickly has done little to restore confidence in the stock market. Instead, he argues that the administration appears to be running around putting out fires.
"The panicked approach is doing more damage through fear than it's doing good to the fundamental problems that ail us," Paulsen said. "It makes them look like they're scared to death and that they don't really know what to do. I was hoping there'd be more of a calming influence."
While Obama has been largely lauded for his quick assembling of his economic team in order to be ready to fight the economic problems in the U.S., his group has done little thus far to instill confidence in the American public, further exacerbating problems.
, Paul Volcker, head of the Economic Recovery Advisory Board, has become frustrated over delays in organizing the economic advisory group that Obama promised during his campaign run. Volcker reportedly blames Lawrence Summers, director of the National Economic Council, for holding up the assembly process and for not inviting Volcker to White House meetings.
Volcker did little to help during testimony before the Senate Banking Committee on Wednesday, when he said that in order to quell problems in the financial system, "it's going to cost more money." Volcker added that he doesn't know "what the administration is going to propose, but I would suspect there's going to need to be some private capital, and probably quite a lot of it."
Meanwhile, Treasury Secretary Timothy Geithner, in addition to stimulus planning, has been working on pushing through
that accept TARP funds, such as
Bank of America
, and working on a revised "bad bank" plan.
"The infighting bothers me less, because that's always going to happen when you assemble a massive amount of high-quality talent," Paulsen said. "But some of the rest bothers me. It seems that for some time now, we're blurring the distinction of emergency economic policy and social justice. And I don't think we should be. Why are we worried about that now when our top mission should be to get out of this economic hole?"
"By looking at the salary issues tells me Geithner is not looking at the issues that got us in this situation in the first place," Smith said, adding that confidence in Obama's picks has been fragile since tax issues for Geithner and Tom Daschle, the nominee for health secretary, first arose.
Obama has argued that the stimulus plan, which totals $819 billion in the U.S. House of Representatives and is inching closer to $900 billion in the Senate, is a prescription for short-term spending, as well as a strategy for America's long-term growth and opportunity. Not all Republicans agree, instead calling for more tax cuts rather than spending billions of dollars on projects that may not add jobs to the U.S. economy.
Still, Senate Majority Leader Harry Reid is quickly pushing for a vote on the stimulus plan, which is expected to come later on Thursday. Reid said he was confident Democrats have enough votes and a small bit of Republican support in order to pass the package.
"It frightens me more that we really don't have good leadership than the fact that this might not get passed tonight," said Paulsen.
Smith argues that Republicans are right to not want another TARP "debacle," where more billions are spent ineffectively. "What do they say when they go back to their constituencies, especially with 2010 and mid-term elections right around the corner?" he asked.
Paulsen says the Obama team should continue to stress the difficulties facing the U.S., but should also point out that the freefall on Wall Street has seemingly stopped.
"The best confidence they could project is that Main Street now looks like what Wall Street looked like last September," Paulsen said. "By the spring, Main Street may stop freefalling the way Wall Street did. It's OK to get up and tell the public that things are bad now, but why isn't the leadership saying that there are signs that things are getting better?"