Obama: Recession recovery has been 'painfully slow'

(CNN) -- President Obama acknowledged Friday that bouncing back from the recession has been "painfully slow," but he insisted that the economy continues to grow as he pushed his administration's new economic proposals at his first news conference in months.

Obama once again urged the Senate to pass his small-business jobs bill, saying it has been blocked by "a partisan (Republican) minority." He praised Sen. George Voinovich, R-Ohio, for announcing that he would not help GOP leaders block the bill.

Still, he said, there is "room for discussion" on competing tax plans. "If the Republican leadership is prepared to get serious ... I would love to talk to them," he told reporters at the White House.

Obama insisted, however, that the GOP plan to extend Bush-era tax cuts for individuals earning more than $250,000 is a bad idea. He again accused Republicans of holding middle-class income tax cuts "hostage" by tying them to an extension of Bush tax cuts for wealthier Americans.

Asked about the upcoming November elections, Obama said that if they are merely a referendum on the economic progress made so far, people will say "we're not there yet" -- implying that Democrats will not fare well. But if the election presents a clear contrast between GOP and Democratic policies, he said, Democrats will succeed at the polls.

He added that if the GOP seizes control of Congress in the midterm elections, it will use its majority status to push the same economic policies backed by President George W. Bush's administration. GOP leaders will push "the same kind of skewed policies" that led to the recession, he said.

Obama also announced that Austan Goolsbee will be named chairman of the White House Council of Economic Advisers. Goolsbee will replace Christina Romer, who stepped down earlier this month as chairwoman of the council, a panel of three White House officials who offer the president economic advice and help formulate policy.

It's a crucial job as the Obama administration tries to dig out of the worst recession since the Great Depression on the eve of a midterm election in which Democrats find the economic anxiety threatening their majorities in the House and Senate.

Friday's news conference was Obama's first full-scale question-and-answer session at the White House in nearly four months. His last news conference there was on May 27 in the East Room, and was devoted in large part to the oil disaster in the Gulf of Mexico.

As expected, Obama largely focused on the state of the American economy and the upcoming midterm elections, but he fielded a wide range of questions, including ones about Middle East peace talks and the Florida pastor who had planned on burning 200 Qurans on the anniversary of the September 11, 2001, terrorist attacks.

The president has pushed for a new $350 billion plan to lift the sagging economy, including $200 billion in tax cuts for businesses to purchase new equipment and write off 100 percent of new investments through the end of 2011. Democrats say that helping small businesses will create more jobs.

The proposal comes at a time when Americans are deeply concerned about the high unemployment rate -- now at 9.6 percent -- and what they see as the lack of hiring.

Obama also has touted a $50 billion proposal for infrastructure investment, as well as $100 billion to extend tax credits to businesses permanently for research and development.

Another option on the table, though controversial, is a second stimulus-like package. If Congress were to pass new economic recovery measures, it could pay for them by closing "tax loopholes," which would raise some $300 billion in new revenue, according to White House economist Jason Furman.

Republicans continue to hammer Obama and Democrats on what they call a nonexistent plan for dealing with the troubled economy.

On Wednesday, House Minority Leader John Boehner, R-Ohio, released a two-part plan to fix the economy. It calls for Congress to freeze most government spending for next year at 2008 levels, before the nearly $800 billion stimulus bill was passed. In addition, the plan would enact a two-year freeze on all current tax rates.

As the president spoke at the news conference Friday, Boehner issued a statement, saying, "Half-hearted proposals and full-throated political attacks won't end the uncertainty that is keeping small businesses from creating jobs.

"Republicans have proposed a two-part plan to boost the economy now by freezing all tax rates for two years and cutting government spending to where it was before all the bailouts, government takeovers, and 'stimulus' spending sprees. This is a plan Congress can and should act on this month. If the president is serious about focusing on jobs, he should be willing to sit down with Republicans and discuss this new idea to get the economy moving again."

Boehner also addressed Obama's selection of Goolsbee to the Council of Economic Advisers, saying it demonstrates a commitment by the administration "to more of the same failed 'stimulus' policies."

Added Senate Minority Leader Mitch McConnell, R-Kentucky: "The president spent a lot of time blaming others and talking about more government spending. But Americans want to know that Washington is going to stop the reckless spending and debt, the burdensome red tape and job-killing taxes."

Obama said one of the reasons he hasn't created a greater spirit of cooperation in Washington is because some GOP leaders decided when he took office that "we're going to sit on the sidelines and let the Democrats solve" the economic crisis.

Taking on tough issues with entrenched special interests creates "a lot of big fights," he said.

Some of those fights were at the forefront during a protracted debate over changes to health insurance regulation. On Friday, Obama defended the bill that finally cleared Congress, saying that skyrocketing medical costs will ultimately decline as more people are covered because of his administration's health care reform initiative.

"We didn't think that we were going to cover 30 million people for free, but the long-term trend in terms of how much the average family is going to be paying for health insurance is going to be improved as a consequence of health care," he said.

Speaking on the eve of the ninth anniversary of the September 11 attacks, Obama said that one of the reasons that anti-Muslim sentiment may have increased in the United States is that "fears can surface" during tough times.

One of the things he most admired about Bush after the September 11 attacks, Obama said, was the former president's decision to make clear that the United States is "not at war with Islam."

"We are one nation under God -- we may call that God different names, but we remain one nation," he said. "I want to make sure that this country retains that sense of purpose."

Asked about the proposed construction of a mosque near New York City's ground zero, Obama said Friday that it should be possible to build a mosque anywhere that a church or synagogue could be built.

"I recognize the extraordinary sensitivities" surrounding the issue, Obama said. But "we are not at war against Islam." The United States is fighting those who have "distorted Islam" and "we've got to be clear about that."

The enemy is a "tiny minority of people" who are "engaged in horrific acts" and have killed more Muslims than anyone else, Obama said. Muslims are other Americans' neighbors, friends and co-workers, he said. They also are fighting in the U.S. armed forces in Afghanistan, he added.

"They are Americans," he said.

On the issue of a Florida pastor at the center of plans to burn dozens of Qurans on Saturday, Obama said, the idea that "we would burn the sacred texts of someone else's religion is contrary to what this country stands for."

He said he hopes the Rev. Terry Jones "prays on it" and refrains from carrying out his plans. The government has to send a "very clear message" that burning the Quran endangers U.S. troops and is a major recruiting tool for al Qaeda," Obama

added.

He also acknowledged that his administration has missed its promised deadline for closing the detention facility at Guantanamo Bay, Cuba.

"The politics (of that issue) are difficult," he said.

Obama insisted he still has confidence in the ability of the U.S. justice system to handle cases involving suspected terrorists. He also said he is still prepared to work with both Democrats and Republicans on appropriate solutions to questions related to civilian trials and military tribunals. The president said the financial costs of detaining people at Guantanamo Bay are much higher than the costs of incarcerating them in a more traditional U.S. prison. He also said Guantanamo remains a motivational tool for al Qaeda.

He said that capturing or killing al Qaeda leader and September 11 mastermind Osama bin Laden remains a high priority for his administration and a key U.S. national security interest. Part of the problem is that bin Laden has "gone deep underground," Obama said. But "the best minds ... are thinking about this day and night."

He said the U.S. military remains in Afghanistan because "that was the place where al Qaeda launched an attack that

killed 3,000 Americans."

We want to "dismantle al Qaeda" and ensure Afghanistan is never again used as a base from which to attack America, he said.

Obama criticized the Bush administration for failing to provide adequate training of Afghan military forces. He insisted that progress has been made in terms of rooting out corruption from the government in Kabul, but "we're a long way from where we need to be on that."

The White House will continue to pressure Afghan President Hamid Karzai on the issue of corruption, Obama said.

He also addressed the issue of Middle East peace talks, which resumed in Washington last week -- though a deadlock remains between Israeli and Palestinian leaders.

Obama conceded Friday that there are "enormous hurdles" to the new talks. His administration understood that "it was a risk for us to promote these discussions, but it is a risk worth taking," he said.

It is in the interests of America, the Israelis and the Palestinians to reach a comprehensive settlement, Obama said. The issue of Middle East peace must be dealt with if, among other things, Israel is to remain both Jewish and Democratic, Obama said. A settlement would also help the United States deal with Iran.

"If these talks break down, we're going to keep on trying," he said.

CNN's Ed Hornick contributed to this report.