Obama vows swift stimulus package
WASHINGTON - President-elect Barack Obama signaled yesterday 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 called it "a plan big enough to meet the challenges we face."
He said he hoped to sign the stimulus package into law on Jan. 20. Obama is already coordinating with the Democratic leaders of Congress, who have said they will begin work in December.
With the worsening economic turmoil certain to mark Obama's first year, his advisers say they are intent on trying to use the crisis as an opportunity to act on many of the issues he emphasized in his campaign, including cutting taxes for lower- and middle-class workers, addressing neglected public infrastructure projects like roads and schools and creating new "green jobs" through federal business incentives for energy alternatives and environmentally friendly technologies.
In light of the recession, Obama is said to be reconsidering one key campaign pledge - his proposal to repeal the Bush tax cuts for the wealthiest Americans. According to several people familiar with the discussions, he instead might let those tax cuts expire as scheduled in 2011, effectively delaying any tax increase while he gives his stimulus plan a chance to work.
"The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions," Obama said in his address. "We now risk falling into a deflationary spiral that could increase our massive debt even further."
Obama's address, a video of which was made available on YouTube, was part of an effort to calm tumultuous financial markets roiled by the failure of an outgoing president and a lame-duck Congress to come up with a plan to boost the economy and restore investor confidence.
Tomorrow, Obama plans to introduce his economic team, starting with his Treasury secretary, Timothy F. Geithner. News that Geithner, president of the Federal Reserve Bank of New York., would get the job sent the stock market up nearly 500 points on Friday after days of sharp losses. Former Treasury Secretary Lawrence H. Summers is to be director of the National Economic Council in the White House, the president's principle economic adviser and policy coordinator, according to an Obama aide.
The economic team will also include Peter R. Orszag, head of the Congressional Budget Office, who will be the next White House budget director. Summers, who was already serving as a campaign adviser to Obama, has advocated for a forceful government stimulus plan in recent newspaper columns, saying the federal government should be doing more, not less, in areas like healthcare, energy, education, and tax relief. Obama seemed to echo those thoughts in his radio address.
"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," he said.
Obama's announcement came after market declines and the prospect of automakers and other storied companies near collapse last week had sparked growing criticism that he was sitting on the sidelines. 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 workforce and billions in aid to strapped states and cities.
"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."
Some Republicans might be won over should Obama decide not to repeal the Bush tax cuts for those making more than $250,000. By simply letting the cuts expire after 2010, as the law provides, Obama would in effect delay the tax increase that high-income taxpayers would have faced in the next year or two under his original plan.
That could have both economic and political benefits. Obama would not be open to the charge from Republicans and other critics that he is raising taxes in a recession, which many believe is counterproductive. By letting the tax cuts expire, Obama would get the benefit of higher revenues in 2011 and beyond to help finance his promised health care plans without having to propose raising taxes on the affluent, and without the Democratic majorities in Congress having to take a vote on a tax increase.
Also, Obama is under far less pressure in the short term to raise revenues to help finance campaign promises because the seriousness of the economic crisis has brought bipartisan agreement that the government must do whatever it can to spur economic growth.
The 2.5 million jobs that Obama promises to save or create over two years is a gross number. With about 1.2 million jobs lost this year, and more projected to be lost in 2009, Obama advisers expect that job losses will outnumber new jobs next year. For 2010, the advisers are projecting positive job growth.
Some economists welcomed Obama's plan, though they said it was difficult to assess without full details.
"The unemployment rate is soaring," possibly into the double digits, said Kenneth S. Rogoff, a professor of economics at Harvard. Senator Harry Reid, the majority leader, said, "We will soon finally have a leader and partner in the White House who recognizes the urgency with which we must turn around our economy, and I look forward to working with him and the new Congress to do so."
Republicans in the next Congress could still block a stimulus package in the Senate, as Obama seemed to recognize. "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."