"Taxes are going to have to go up," said William Galston, a domestic policy aide to President Bill Clinton and now a scholar with the Brookings Institution. To suggest otherwise is "a denial not only of reality, but of necessity."
Obama faces rising public fury toward bankers and bailouts at a time of double-digit unemployment along with pressure to rein in spending. This populist anger helped sweep little-known Republican Scott Brown to victory in the Massachusetts Senate race.
Taking a harder line that some Democrats say was late in coming, Obama has proposed a special tax on large banks to recover "every last dime" of bailout money and wants to let regulators break up banks deemed too big to fail.
Beating up on banks and bankers is one of the few causes in town embraced by Democrats and Republicans alike.
Obama is expected to make spending restraint a theme of his State of the Union address, although aides say that significant belt-tightening will have to wait until after the recovery gains more steam.
He plans to create a bipartisan commission to make recommendations by the end of 2010 on how to reduce the budget deficit. This year's projected $1.4 trillion deficit would add to a $12-trillion-plus national debt.
The commission also would make recommendations on taxes and spending on "entitlement" programs such as Social Security, Medicare and Medicaid. Its plan would go to Congress for up-and-down votes.
Obama must steer the economy through a darkening political storm for Democrats. In addition to dropping the Senate contest in Massachusetts on Tuesday, the party lost governors' races last fall in New Jersey and Virginia. Coming this fall are congressional elections, where the Democrats' majority in Congress could be threatened.
Despite improvements in manufacturing and a strong 10-month stock market rally, housing prices are still depressed, mortgage foreclosures increasing and bank loans tight for all but the biggest businesses. Factor in those people who have stopped looking for work or who are unable to find full-time jobs, and the "underemployment" rate swells to over 17 percent.
Gone at the White House is talk about "stimulus," a word the public seems to associate more with bank bailouts and wasteful spending than new jobs. Instead, White House officials now talk about "target ideas" that "will have a positive impact on private sector hiring."
"The road to recovery is never straight. We have to work every single day to get our economy moving again. For most Americans, and for me, that means jobs," Obama said recently.
It won't be easy.
Forecasters say it could be years before the employment rate drops below 8 percent, let alone to pre-recession levels of 5 percent to 6 percent. It took four full years for employment to regain its peak after the mild 2001 recession.
Economists cite a rule-of-thumb that suggests it takes a 2 percentage point rise in the gross domestic product to lower the unemployment rate by 1 percentage point. Government and private economists expect GDP growth of no more than about 2.5 percent to 3 percent this year.
"Where are the jobs?" House Minority Leader John Boehner, R-Ohio, asks in news release after another, as the GOP lashes out at Obama's policies and basks in the Massachusetts victory.
