–Retransmitting, Correcting Headline

Bay Yali N’Diaye

WASHINGTON (MNI) – The U.S. economy is “gaining steam” and remains
“an important engine for economic growth” in the world, but at the same
time, it faces headwinds from states and local governments spending cuts
as well as the still struggling housing market, President Barack Obama
said Tuesday.

In addition, unemployment remains “very high,” he said in answering
questions following an address at the American Society of News Editors
Annual Conference.

If “state and local government hiring were on par to past
recoveries, the unemployment rate would be about a point lower than it
is right now,” Obama said.

And if construction activity was at a “normal level,” it would also
lower the unemployment rate by an additional point.

Obama said part the current growth challenge, indeed, “has to do
with the very specific issues of huge cuts in states and local
government and the housing market still recovering from this massive
bubble.”

“Those two thing are huge headwinds in terms of growth.”

As a result, whoever becomes the next U.S. president will inherit
an economy that is recovering but not recovered, he said.

So continuing to support growth is necessary.

But so is the need to “take care of our deficits,” Obama said.

“We can’t return to a time when by simply borrowing and consuming
we end up driving global economic growth,” Obama warned, adding “those
days are over.”

The challenge, he said, is not short-term discretionary spending,
“which is manageable.”

“Our problem is that our revenue had dropped down to between 15 and
16% far lower than it has been historically,” while health care costs
have “surged” and demographic trends increase pressure on financing
Medicare, Medicaid, and social security programs.

“So at a time when the recovery is still gaining steam, and
unemployment is still very high, the solution should be pretty
apparent,” Obama argued.

To that effect, he repeated his call for a “balanced solution” that
will support long-term growth while stabilizing the budget.

“Even as we continue to make investments in growth today,” he said,
“we focus on a long-term plan to stabilize our revenues at responsible
levels and to deal with our health care programs in a responsible way.”

“Let’s take on Medicare and Medicare in a serious way,” he said by
reducing health care costs in particular.

On the issue of the health care law, Obama said he has “enormous
confidence that in looking at this law,” the Supreme Court “is going to
exercise its jurisprudence carefully” due to its great powers.

“I don’t anticipate the court striking this down,” he predicted.

** MNI Washington Bureau: 202-371-2121 **

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