WASHINGTON " President Barack Obama and congressional Democrats are stepping through an economic minefield and sowing the ground with unprecedented initiatives that capitalize on the recession to rein in Wall Street and broaden government's reach.
Nothing better illustrated this watershed than the bustle and scope of the past few days.
Obama's treasury secretary, Timothy Geithner, touched off a Wall Street rally with a long-awaited plan to help rid banks of their toxic assets. Geithner rolled out a comprehensive overhaul of financial regulations in hopes of avoiding another meltdown. Congressional Democrats worked to put their own imprint on a budget full of ambition but saddled with deficits.
In each case, the policies showed a pumped up role for government: leveraging money from the private sector, taking over troubled institutions, better governing ever-expanding financial markets, and promising greater influence over health care, energy and education. Just as government proved it could flex its muscle, it also showed where it could wilt.
After days of fuming over bonuses paid by insurer American International Group Inc., Obama and members of Congress checked their tantrums and moved on. The House and Senate budgets embraced Obama's policy priorities, but lawmakers delayed difficult decisions on how to pay for them.
The flurry coincided with and was partly motivated by Obama's first overseas trip, which starts with a stop in London for an economic summit Thursday of 20 major and developing nations. There are wide differences between the U.S. and Europe over how to prime economies. Also, China has suggested replacing the dollar with a new global currency.
"We're kind of at a critical point," says former Rep. Mickey Edwards, an Oklahoma Republican and Princeton University lecturer.
"Proposals that are being made are to have the U.S. government much more involved in financial and business decision making," Edwards said. "Whether it's leading up to the G-20 and saying how do we reassure the rest of the world of our leadership, or how do we have a regulatory system that works with what the world looks like now " it's a big moment."
Obama's heaviest lifting came last week as he worked to save his domestic priorities and accommodate deficit-conscious Democrats while also standing squarely behind Geithner's bank rescue and financial regulation plans.
In the face of withering criticism from Republicans, who say his budget borrows, spends and taxes too much, Obama has used the economic crisis to justify his long-term fiscal blueprint, even though his own forecasts envision the country out of the recession by 2011.
"This budget is inseparable from this recovery, because it is what lays the foundation for a secure and lasting prosperity," he said during his prime-time press conference Tuesday.
Sen. Judd Gregg, the top Republican on the Senate Budget Committee, used his party's weekly radio address Saturday to slam Obama's grand spending plans. "We believe you create prosperity by having an affordable government that pursues its responsibilities without excessive costs, taxes or debt." said Gregg, R-N.H.
House and Senate budget writers trimmed some of Obama's spending proposals, cut his budget outlook from 10 years to five years, and refused to endorse administration plans for fees on greenhouse gas emissions and limits on tax deductions for wealthier earners.