Obama says strong recovery will begin with small businesses

President Barack Obama told an audience in rural Iowa that the U.S. economy will come back “stronger than before” after the worst recession in decades, as he sought to regain the initiative on the economic debate that likely will dominate the 2012 campaign.

In opening a forum on the rural economy at Northeast Community College in Peosta, Obama said the recovery must be led by small businesses and entrepreneurs and “isn't going to be driven by Washington.”

“It is going to be driven by folks here in Iowa,” he said.

In the state that launched his successful bid for the Democratic presidential nomination in 2008, Obama said the historic resilience of the American people will see the country “through this moment of challenge.” He also criticized the political atmosphere in Washington.

The “politics of the short term” and “the refusal of a faction in Congress to put country ahead of party” are stalling measures to bolster growth, Obama said.

On the second of three days traveling through rural areas of the Midwest, Obama is outlining proposals that the administration says will aid the economy in the farming regions outside the nation's big cities.

Rural Initiatives

Among them are expanded loan programs run by the Small Business Administration through a $1 billion investment fund aimed at luring private capital, job search and training services, and increased access to health care and technology. Money will come from existing programs and funding, according to a White House fact sheet.

The administration also is announcing that the Navy and the departments of Agriculture and Energy will invest as much as $510 million in a program aimed at producing biofuels for aircraft and ships. The plan, part of the administration's energy strategy, will benefit rural areas, according to Agriculture Secretary Tom Vilsack.

As he did yesterday during stops in Minnesota and Iowa, Obama listed initiatives he has proposed, including renewing a 2 percentage point cut in the payroll tax paid by workers, which is set to expire at the end of the year, and passing legislation to spur road construction.

“We could do even more if Congress is willing to get into the game,” he said.

Stocks Fall

U.S. stocks fell for the first time in four days on concern that the European debt crisis may worsen and after the Commerce Department said housing starts fell last month. The Standard & Poor's 500 Index declining 1 percent to 1,192.5 at 2:09 p.m. in New York. The benchmark rallied 7.5 percent in the three previous sessions, its biggest jump since March 2009.

Federal Reserve data showed today that industrial production in the U.S. climbed in July by 0.9 percent, the most this year and almost twice as fast as economists forecast

The administration said the trip was about the economy rather than the coming campaign. Obama, though, has taken aim at the Republican presidential candidates for rejecting, during their Iowa debate on Aug. 11, any increase in taxes to trim the deficit even if they were offered $10 in spending cuts for each $1 in new government revenue.

“None of them would take it,” he said yesterday. “That's just not common sense.”

Taxes

Obama also criticized House Speaker John Boehner for rejecting a $4 trillion deficit-cutting deal “because his belief was we can't ask anything of millionaires and billionaires and big corporations.”

To back up his call for a mix of tax increases for the wealthy along with shrinking spending, Obama throughout the day cited an opinion article by billionaire investor Warren Buffett that was published in The New York Times.

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” the chairman and chief executive officer of Berkshire Hathaway Inc. wrote. “It's time for our government to get serious about shared sacrifice.”

Buffett expanded on the issue in an interview with Charlie Rose broadcast on PBS yesterday, calling the stance of the Republican candidates on taxes “pathetic.”

“When they take that attitude they are really saying, ‘you know I want to win this primary,'” Buffett, who has served as an informal adviser to Obama said. “They are saying ‘The country be dammed, I want to win this primary.'”

White House Reaction

White House press secretary Jay Carney said while he wasn't aware of any coordination between the administration and Buffett regarding the message on taxes, “We endorse his point of view.”

The Republican National Committee responded to Obama's trip by releasing an ad, “Obama's Debt-End Bus Tour,” that lists the jobs lost in Minnesota, Iowa and Illinois since he took office.

The president also was the target of criticism from Texas Governor Rick Perry, who announced Aug. 13 that he is running for the Republican presidential nomination.

“The president of the United States has conducted an experiment on the American economy for almost the last three years, and it has gone tragically wrong,” Perry said yesterday at a Republican fundraiser in Cedar Rapids, Iowa. Perry said any move by Federal Reserve Chairman Ben S. Bernanke to act on stimulus measures before the 2012 election would be “treasonous.”

Carney told reporters that the administration takes the Fed's independence “quite seriously” and criticized Perry's “threatening” language.

Private Talks

The president traveled about 160 miles, rolling through rural parts of Minnesota and Iowa rarely visited by presidential motorcades, meeting with local residents along the way. In Guttenberg, Iowa, this morning, Obama met with five owners of small businesses and greeted local residents at Rausch's Cafe.

Among the residents was Betty McVicker, 90, who said she is a registered Republican and didn't vote for Obama in 2008. Still, she went to Rausch's for a chance to meet him.

“He's our president,” she said. “I'm thrilled to pieces.”

The Midwest tour is reminiscent of Obama's campaign swings though the area in 2008, including the same music soundtrack.

Now, as an incumbent, Obama faces one of the most challenging periods of his presidency. A worsening economic outlook, Standard & Poor's first-ever downgrade of the U.S. credit rating, risks of a spillover effect from Europe's debt crisis and volatility in global markets are drawing comparisons to the beginning of the 2008 financial crisis.

Fitch Ratings today affirmed its top AAA rating on U.S. Treasuries. Standard & Poor's, another of the three major ratings companies, on Aug. 5 cut its rating on federal debt to AA+ from AAA. The yield on the benchmark 10-year note dropped 0.06 percentage point to 2.25 percent at 12:52 p.m. in New York, according to Bloomberg Bond Trader prices.