What's more, some banks that received government aid because they were deemed "too big to fail" are now bigger than they were in 2008, but they are smaller as a share of the economy than the largest banks in other big economies. Three years after Obama signed a sweeping overhaul of lending and high-finance rules, execution of the law is behind schedule.
This glass-half-empty-glass-half-full state of the economy has produced competing story lines about the role Obama's administration has played in getting the country to this point. Did Obama's approach validate the philosophy of spending your way out of crisis or did some of his policies actually slow the recovery?
In the ABC interview, Obama said globalization and new technology have contributed to the income gap in the country, and it has been building since before the recession.
He argued that his proposals to increase spending on education and public works projects are designed to counter that trend, but face Republican opposition.
"There's no serious economist out there that would suggest that, if you took the Republican agenda of slashing education further, slashing Medicare further, slashing research and development further, slashing investments in infrastructure further, that that would reverse some of these trends of inequality," he said.
Much of the credit for the current recovery, tepid as it may be, goes to the Federal Reserve. It has held short-term interests rates near zero and has undertaken a massive bond purchase program that has supported spending, lifted stocks and kept home mortgage rates at near record lows.
"The Fed was the single biggest policy move in the crisis. No question about it," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and top economic adviser to Republican Sen. John McCain's 2008 presidential campaign.
Now many say the economy needs long-term measures that would reduce spending on entitlement programs such as Medicare and Social Security and that would overhaul and simplify the tax system.
"We've done too much temporary targeted intervention, we're passed the time for that," said Holtz-Eakin, who now heads the American Action Forum, a conservative public policy institute. "It's no longer 2008 when things were falling like a rock. It's time to have long-term growth policies. We don't have them."
Obama and Republicans are at a stalemate, however.
Obama has proposed some changes that would reduce spending on Social Security and Medicare, including an adjustment that would lower cost-of-living adjustments. But he has insisted on more tax revenue by closing what he says are loopholes for the rich, a step Republicans won't take.
The impasse has revived threats of a government shutdown after the current budget year ends Sept. 30 and, more economically damaging, a default if Congress can't agree to raise the debt ceiling later in October.
Some conservative Republicans say they will only extend current spending levels or increase the debt ceiling if Obama delays putting in place his health care law, a condition Obama has flatly rejected.
"Never in history have we used just making sure that the U.S. government is paying its bills as a lever to radically cut government at the kind of scale that they're talking about," Obama said.
House Speaker John Boehner, R-Ohio, has tried to keep the focus on spending reductions, even as some on his right insist on defunding or delaying the health care law.
"This year the federal government will bring in more revenue than any year in the history of our government, and yet we will still have nearly a $700 billion budget deficit," he said. "We have a spending problem. It must be addressed, period."
Follow Jim Kuhnhenn on Twitter: http://twitter.com/jkuhnhenn
Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Original headline: Obama: Budget tightening could widen income gap
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