Obama reckons with economy at CBS News town hall

In an effort to make his case on the economy to a broad audience, President Obama sat down with CBS News this week for an hour long town-hall meeting at the Newseum in Washington.

The president's town hall appearance, which was taped Wednesday afternoon and broadcast on CBS News' "The Early Show" Thursday morning, came as the economy continues to struggle to emerge from recession. Gas prices have risen nearly a dollar since the year began, and now hover around $4 per gallon; unemployment stands at nine percent. And while Mr. Obama's saw an increase in his overall approval rating in last week's CBS News/New York Times polltied to the killing of Osama bin Laden, his approval rating on the economy was just 34 percent - the lowest level of his presidency.

The town hall included a mix of questions from CBS News moderators Harry Smith, Erica Hill and Rebecca Jarvis and questions from an audience made up of Washington residents, college students, people who have participated in CBS News polls and CBS News viewers.

Hill opened the questions by noting that when it comes to the economy, "sometimes it can feel like for every two steps forward, it's one step back." She asked Mr. Obama how Americans can get into a more positive mindset.

The president responded by stating that "you're absolutely right that people still aren't feeling" the economic recovery.

"I think a lot of people just feel like the American dream, the core notion that if you work hard and you act responsibly that you can pass on a better life to your kids and your grandkids -- a lot of folks aren't feeling that anymore," he said. "And so, that's why it's so important for us to focus not only on recovery from recession, but also dealing with some of those problems that existed before the recession so that middle class families are able to see their incomes go up, their savings go up, they can retire with dignity and respect, they can send their kids to college."

He later said the recovery has been "uneven," with sections like manufacturing doing relatively well while others lag. "And it's gonna take us several years for us to get back to where we need to be," he added. "But the important thing, though...is we're moving in the right direction."

A member of the audience then asked the president about what he planned to do about gas prices. He responded by stressing domestic production - rebuffing a Republican criticism - and noting that "we're producing more oil now than any time since 2003."

"Even after what happened in the Gulf, we're still saying to oil companies, 'You can drill, as long as you do it safely,'" he said. "We don't want to go through another oil spill like we had last summer. But we are gonna give you permits if you show us that you've got a good plan for containing it if something goes wrong." Mr. Obama then argued for the importance of a long-term energy policy and pointed to increased fuel-efficiency standards for cars, which he said would save 1.8 billion barrels of oil.

Karin Gallo told Mr. Obama about her difficult situation - she had lost her job and is seven-months pregnant and building a house - and asked him what he would do if he were in her shoes.

The president responded by stressing the importance of government workers - Gallo worked at the National Zoo - and pointed to Gallo's situation to argue that budget-cutting decisions have meaning.

"These are not abstract questions," he said. "And I think Karin makes it really clear that there are real consequences when we make these decisions." Mr. Obama later promised to speak to Gallo after the taping.

Jarvis read a question that came in over email asking how employers can become comfortable with hiring at a time of economic uncertainty. Pointing to improved jobs numbers, the president argued that employers are feeling more confident, adding that "the key is to recognize that some of the jobs that left aren't going to be coming back, but we've got to be creating new industries and new jobs here in America." He pointed to the clean energy industry to support his point.

Jarvis pointed to the fact that wages are stagnating even as companies make record profits. "If this isn't the right circumstance for raising wages and really going out and employing new people," she asked, "what will be?"

The president said in response that companies must "start placing their bets on America."

He pointed to government efforts to stabilize the economy and financial system, stating, "companies have benefited from that, and they're making a lot of money." He suggested they owed it to taxpayers to invest in "American workers and American products."

Another questioner told Mr. Obama that she owes more on her house than it is worth and asked him, "do you have any plans to help improve the housing market so hardworking Americans like myself don't lose their homes?"

Mr. Obama said the housing market, along with gas prices, is "the biggest headwind" facing the country. He pointed to loan modification programs that have helped "underwater" homeowners, prompting Smith to state that a lot of the administration's efforts haven't worked well.

"Well, it's not that it hasn't worked," the president responded. "The problem is, is that the need is so great. So it's like you have a huge pothole, and you only have so much gravel. And if you're talking about-- $5 trillion worth of home value, and a program that only has a few billion dollars, then there are a lot of people who are not going to be helped. And so what we're trying to do is to figure out how can we get the banks to do more."

Watch the full town hall below:

Special coverage: CBS News Town Hall on the Economy, with President Obama