By Sam Youngman - 09/25/09 10:18 AM EDT
PITTSBURGH — While hosting the G-20 summit that began Thursday evening, President Barack ObamaBarack ObamaNigeria is making progress on economic reform and security Obama the 'X' factor of the 2016 cycle FULL SPEECH: Hillary Clinton closes out Democratic convention MORE will try to win international support for charting a new course for the world economy.
But the leaders he hosts will be wondering how much the new president can accomplish back home.
“That means taking steps to rekindle demand so that global recovery can be sustained,” said Obama, who outlined his goals for the summit during his address to the United Nations General Assembly in New York City. He was scheduled to host visiting leaders at a dinner Thursday night.
At the G-20, the United States “will work with the world’s largest economies to chart a course for growth that is balanced and sustained,” according to Obama.
But Obama is likely to run into skepticism in Pittsburgh that the reforms he proposes will win support domestically. On financial regulatory reform, the budget deficit, trade and climate change, Obama’s wishes have run into opposition on Capitol Hill.
The White House has made it clear that future sustained growth must be based on a world economy where U.S. consumers are saving more of their dollars, while their counterparts in China spend more of theirs.
Last fall’s financial collapse and recession were triggered in part by a bubble in the housing market exacerbated by trade flows. The purchase by China of U.S. dollars allowed U.S. interest rates to stay low and propped up the value of the U.S. dollar.
That helped China export cheap products to the U.S., which were purchased by American consumers taking out additional loans on their homes.
“We can’t go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling anything to them,” Obama said bluntly during a Sunday interview on CNN.
That message is likely to run into some opposition in Pittsburgh, said Dan Price, a former assistant to President George W. Bush for international economic affairs.
The Chinese, Price said, are reluctant to have their practices identified as “a factor in economic stability.”
China and other countries are also worried about growing American debt, an issue that may dominate the next few years of Obama’s administration. The U.S. is on track for a $1.6 trillion budget deficit this year.
While Obama has expressed a commitment to reducing the deficit, he may be limited by a Congress that wants to increase spending, not reduce it, at a time when the unemployment rate continues to soar.
Rep. Mike Doyle (D-Pa.) said Thursday that deficit reduction is a “desirable goal” that Congress wants to tackle, but it is not a legislative priority while the economy is still struggling.
“It’s something we want to be in a position to do, but economic growth is what’s going to allow us to do that,” Doyle said.
White House press secretary Robert Gibbs said Thursday that the G-20 will be dominated by discussions of financial regulatory reform. Reaching an “international consensus” on that issues will be the most important takeaway from the meeting, he told reporters on Air Force One.
The U.S. also will lead discussions on setting capital requirements for banks and winning an agreement to reduce subsidies provided internationally for fossil fuels, Gibbs said.
But regulatory reform is another issue where Obama will face domestic challenges. Administration officials have been pushing Congress to move forward its regulatory proposals, but Democrats and Republicans have different ideas over how far the reforms should go.
Price said Obama will also come under scrutiny on trade, where the president faces pressure from Democrats in Congress.
Obama’s decision last week to levy tariffs on Chinese tires is only part of the problem, Price said. Member countries will be looking to Obama to clarify where his administration is on pending free trade agreements with nations like South Korea and Colombia as well as Mexico’s complaint that the U.S. is blocking Mexican trucks in violation of the North American Free Trade Agreement.
Price said foreign leaders will be asking, “Where is the Obama administration on these issues that are so critical to the G-20 countries and so critical to economic growth?”
Still, the atmosphere and goals in Pittsburgh remain a stark contrast from the last G-20 meeting in April, when the crisis was still ravaging world economies and recovery seemed like a distant dream.
“At that point, GDP was contracting at about a 6.7 percent rate, and now we’re talking about or debating about the pace of recovery,” Michael FromanMichael FromanFroman: Too early to start trade talks with the UK Dems push for US, EU cooperation on China's market status US, EU team up on raw minerals trade case against China MORE, deputy national security adviser for international economic affairs, told reporters ahead of the summit.