Obama says voters may blame him for economy

President Barack Obama insisted Friday that the U.S. economy is digging itself out of the deepest recession in decades but conceded that "progress has been painfully slow" and many voters in November's elections may blame him.

Facing a rising jobless rate, Obama told a White House news conference: "For all the progress we've made, we're not there yet. And that means people are frustrated and why people are angry."

"Because I am president, and the Democrats have control of the House and Senate, it's understandable that people are saying, 'What have you done?"'

The president, who also is the leader of the Democratic Party, spent much of his appearance before cameras on the defensive, underscoring his frustration with being unable to convince the public that his economic fixes are working.

At his first formal session with reporters since May, one that lasted nearly an hour and 20 minutes, Obama also appealed to Americans to stand by the nation's long heritage of religious tolerance.

The Rev. Terry Jones, from a small fundamentalist church in Florida, triggered outrage when he promised to burn the Quran on Saturday's anniversary of the Sept. 11 attacks. He canceled the plans Thursday but then said he was reconsidering. Obama said he hopes Jones "prays on it and refrains from doing it."

Declining to mention Jones' name, Obama referred to him as "the individual down in Florida."

A debate is also raging over whether an Islamic center should be built near the site of the Sept. 11, 2001, attacks on the World Trade Center in New York.

Obama said people must remember that the country's enemy is not Islam but al-Qaida and other extremist groups. He said Americans can't turn on each other and let their fears lead to divisions.

On the eve of the ninth anniversary of the terror attacks, Obama said the U.S. is still hunting for attacks mastermind Osama bin Laden. He said bin Laden had gone "deep underground" but efforts to hunt him down would go on "as long as I'm president."

He said "the folks who are most interested in the war between Islam and the West are al-Qaida. That's what they've been banking on." He said the battle was against just a handful of people "who are engaging in hateful acts."

He counseled respect and inclusion for Muslims in the United States. He said, "They are Americans. We don't differentiate between 'them' and 'us.' It's just us."

As for continued terror threats against America, nine years after 9/11, Obama said, "There is always going to be the potential for an individual or a small group of individuals, if they are willing to die, to kill other people. ... That threat is there, and it's important, I think, for the American people to understand that. And not to live in fear; it's just a reality of today's world that there are going to be threats out there."

He added, "We are going to have this problem out there for a long time to come, but it doesn't have to completely distort us and it doesn't have to dominate our foreign policy. What we can do is to constantly fight against it."

On the economy, Obama repeated his contention that Republican obstructionism is hampering his ability to steer the nation into a stronger recovery. He renewed his insistence that Senate Republicans drop their stalling of a bill before the Senate to help small businesses.

And he said yet again that Bush-era tax cuts should be extended for individuals earning less than $200,000 a year and joint filers earning less than $250,000. All the Bush tax cuts are to expire at the end of this year unless Congress acts.

Obama said Congress shouldn't delay extending the middle-class tax cuts any longer.

"Why hold it up? Why hold the middle class hostage?" he said.

Some prominent Democrats recently have suggested temporarily extending all of the expiring cuts, for perhaps a year or two, as a compromise. But so far Obama has dug in and rejected all talk of such a deal.

He said extending tax cuts for the wealthiest Americans "is a bad idea."

Obama repeatedly sought to justify the high-dollar actions his administration has taken to boost a sputtering recovery. And he blamed Republicans for holding back future progress by uniformly opposing other proposals on the table.

His previous revival efforts have worked, Obama said, but "haven't done as much as we needed to do." With public opinion sour on the first economic stimulus plan, Obama initially refused to call the three-pronged economic plan he laid out this week a "stimulus" plan but then said: "There's no doubt that everything we've been trying to do .. . is designed to stimulate growth and jobs in the entire economy."

Much of the summer has been marked by one discouraging economic report after another.

Yet, reports so far this month -from manufacturing to new jobless claims to home sales to business activity - have topped most forecasts. That has brightened the outlook somewhat as worries of a "double-dip" recession fade.

Still, there is little that Obama can do that is likely to turn the economy around in the short time before Election Day on Nov. 2.

Facing a possible GOP blowout in November, many Democrats who supported Obama earlier this year on his landmark health care overhaul bill have sought to distance themselves from the unpopular law. Some Democrats have actively criticized it as they campaign.

Asked why this was so, Obama cited a "political season" in which he said every candidate has "their own district, their own makeup, their own plan, their own message."

With the unemployment rate at 9.6 percent, Obama said that Democratic and Republican candidates alike "are going to make the best argument they can right now."

"That's how political races work," he said.

Obama over the past week has outlined a trio of job-creation ideas designed to prod the economy: $50 billion for roads, rail lines and other infrastructure spending, a permanent research and development credit and upfront 100 percent business write-offs through 2012.

With polls suggesting that voters have decided - rightly or wrongly - that his $814 billion stimulus plan last year was less than a success, the White House has been steering clear of portraying these new items as another stimulus.

Yet when he was asked directly whether the unpopularity of the first stimulus was the reason White House officials weren't using that word this time, Obama said:

"I have no problem with people saying the president is trying to stimulate growth and jobs. There's no doubt that everything we've been trying to do ... is designed to stimulate growth and jobs in the entire economy." He said he hoped Republicans had the same goal.

Facing a possible GOP blowout in November, Obama sought to rally his struggling party, casting Democrats as warriors for the hard-pressed middle class and Republicans as protectors of millionaires and special interests.

Asked how he had changed Washington, Obama said the dreadful economy made it hard to demonstrate real progress.

"I think that's fair. I'm as frustrated as anybody by it," Obama said.

Obama also:

- Said he was naming White House economist Austan D. Goolsbee to succeed Christina Romer as chairman of the president's Council of Economic Advisers.

- Said he is encouraging peace talks between Israel and the Palestinians because the alternative is a status quo that puts both parties - and the U.S. - at risk.

- Praised consumer advocate Elizabeth Warren, a Harvard professor and head of a panel investigating the financial meltdown, but said he's not ready to make an announcement of whether she is his choice to head a new financial consumer protection bureau.

- His administration has fallen short in his goal of closing the Guantanamo Bay detention center after promising to close it within his first year as president. He said he still believes the American justice system is capable of prosecuting, convicting and holding terrorists who have attacked the U.S.