Obama outlines plan for economy
News Tribune news services
WASHINGTON – President-elect Barack Obama signaled Saturday that he would pursue a far more ambitious plan of spending and tax cuts than anything he outlined on the campaign trail, setting the tone for a recovery effort that could absorb and define much of his term.
In the Democrats’ weekly radio address, Obama said he would direct his economic team to design a two-year stimulus plan with the goal of saving or creating 2.5 million jobs.
He said he hoped to sign the stimulus package into law soon after taking office on Jan. 20. Obama is already coordinating with the Democratic leaders of Congress, who have said they will begin work in December.
The plan is more expansive – and undoubtedly more expensive – than anything proposed so far to revive the deteriorating economy. Obama said the darkening economic outlook demands that Washington act “swiftly and boldly” to diminish the risk that the nation “could lose millions of jobs next year.”
“The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions,” Obama said, citing chaotic financial markets, rising jobless claims and the specter of a “deflationary spiral that could increase our massive debt even further.” He provided few details and no price tag, but said his economic team is working on “a plan big enough to meet the challenges we face that I intend to sign soon after taking office.”
The quandary for Obama has been how to finesse a set of challenges not seen since 1932: a quickly deteriorating economy and a transition of power between two presidents with vastly different views on how to fix it. Aides are wary that further declines will make the new president’s job harder, but they also do not want to take ownership of problems they do not yet have the formal power to fix.
“They recognize it’s a careful balancing act because you want to bring a whole new face to it when you’re in office,” said Leon Panetta, a former White House chief of staff under President Bill Clinton who has been an informal adviser to Obama’s aides and has had conversations with them in recent days. “But at the same time, there’s an underlying concern that things seem to be deteriorating rapidly.”
Panetta said the country is “caught between a president who doesn’t have a lot of credibility even if he tries to do something, and a new president who, if it looks like he’s going to lay out things he’s going to try to do, it looks like he’s putting the cart before the horse.” He added, “It’s a tough place for the country to be in.”
Obama has scheduled his second formal news conference since the election for Monday to introduce his economic team, including Federal Bank of New York President Timothy Geithner, Obama’s nominee for Treasury secretary; and Harvard economist Lawrence Summers, a Clinton administration Treasury chief who is expected to serve as a top Obama White House economic adviser.
“We’ll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jump-start job creation in America and lay the foundation for a strong and growing economy,” Obama said. “We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”
Though advisers say they have not begun to fill in the details, Obama’s proposal would go beyond the $175 billion stimulus plan that he proposed in October. That included a $3,000 tax credit to employers for each new hire above their current work force and billions in aid to strapped states and cities.
Separately, Democratic leaders in Congress have been calling for a robust economic recovery initiative of up to $300 billion, including large spending on infrastructure to create jobs. President George W. Bush has refused to consider a package so large, yet even some conservative economists have said $300 billion is the minimum needed to spur the economy.
“There are no quick or easy fixes to this crisis, which has been many years in the making,” Obama said. “And it’s likely to get worse before it gets better. But January 20th is our chance to begin anew, with a new direction, new ideas and new reforms that will create jobs and fuel long-term economic growth.”
Congressional aides who have been involved in developing stimulus proposals said that any plan to create 2.5 million jobs is likely to be well over $200 billion, or between 1 percent and 2 percent of the gross domestic product.
Such a plan would be bold by historic standards. President Clinton, facing a weak economy when he took office in 1993, proposed a $16 billion stimulus package, which was blocked in the Senate. Obama’s proposal would be an order of magnitude larger, even when adjusted for the larger size of today’s economy.
Some economists have compared Obama’s proposals to the spending spree President Franklin D. Roosevelt launched during his early months in office in 1933. Roosevelt offered jobs programs, such as the Civilian Conservation Corps, and cash for public-works projects, such as the Tennessee Valley Authority, in hopes of easing the Great Depression.
While the stimulus plan Obama discussed on the campaign trail included tax cuts, he did not mention any changes in tax policy in his address Saturday. But House Democrats say they expect to push much of Obama’s tax-cutting agenda along with a stimulus measure in January. That could mean enacting legislation that would extend Bush tax cuts for families who earn less than $250,000 past the 2010 expiration date.
Democrats are debating whether to roll back the tax cuts for wealthier families or let them expire on Dec. 31, 2010, as current law requires. Allowing them to expire would give the government additional revenue without forcing Democrats to vote to raise taxes. It also would avoid enacting a tax hike during a recession, which economists say would be unwise.
Without details, it’s impossible to say if Obama’s goal of creating 2.5 million jobs is realistic. It’s also likely to be difficult to assess its effectiveness. Because unemployment is expected to soar in the coming months, the country would shed jobs regardless of any government action. Obama is pledging to add 2.5 million jobs to that lower employment level.
There also is no assurance that Congress will approve such a large package. Republicans, particularly in the Senate, have resisted additional spending on the economy. While Democrats will have stronger majorities in both chambers in January, Obama acknowledged that Republicans in the next Congress could still block a big stimulus package.
“I know that passing this plan won’t be easy,” Obama said. “I will need and seek support from Republicans and Democrats, and I’ll be welcome to ideas and suggestions from both sides of the aisle.”
“But what is not negotiable,” Obama said, “is the need for immediate action.”
The New York Times, The Washington Post and the Los Angeles Times contributed to this report.
