As Outlook Dims, Obama Expands Recovery Plans

Barack Obama, naming picks for top posts last week in Chicago, has told his aides to be bold in addressing economic troubles.

WASHINGTON — Faced with worsening forecasts for the economy, President-elect Barack Obama is expanding his economic recovery plan and will seek to create or save 3 million jobs in the next two years, up from a goal of 2.5 million jobs set just last month, several advisers to Mr. Obama said Saturday.

Even Mr. Obama’s more ambitious goal would not fully offset as many as 4 million jobs that some economists are projecting might be lost in the coming year, according to the information he received from advisers in the past week. That job loss would be double the total this year and could push the nation’s unemployment rate past 9 percent if nothing is done.
The new job target was set after a meeting last Tuesday in which Christina D. Romer, who is Mr. Obama’s choice to lead his Council of Economic Advisers, presented information about previous recessions to establish that the current downturn was likely to be “more severe than anything we’ve experienced in the past half-century,” according to an Obama official familiar with the meeting. Officials said they were working on a plan big enough to stimulate the economy but not so big to provoke major opposition in Congress.

Mr. Obama’s advisers have projected that the multifaceted economic plan would cost $675 billion to $775 billion. It would be the largest stimulus package in memory and would most likely grow as it made its way through Congress, although Mr. Obama has secured Democratic leaders’ agreement to ban spending on pork-barrel projects.
The message from Mr. Obama was that “there was not going to be any spending money for the sake of spending money,” said Lawrence H. Summers, who will be the senior economic adviser in the White House.
Mark Zandi, chief economist of Moody’s Economy.com, who was an adviser to Senator John McCain’s presidential campaign, said, “My advice is, err on the side of too big a package rather than too little.” In an interview, Mr. Zandi, who lately has advised Democratic leaders in Congress, also said he would probably soon raise his own recommendation of a $600 billion stimulus.

Besides new spending, the Obama plan would provide tax relief for low-wage and middle-income workers of roughly $150 billion, Democrats familiar with the proposal said. The government would probably reduce the withholding of income or payroll taxes so that most workers received larger paychecks as soon as possible in 2009, an Obama adviser said.
The sorts of jobs Mr. Obama would propose to create involve construction work on roads, mass transit projects, weatherization of government buildings and installation of information technology in medical facilities, among others.

The outlines for Mr. Obama’s emerging plan, which he is developing in consultation with Congress, including some Republicans, were mostly settled last Tuesday when he met for four hours with economic and policy advisers. Mr. Obama and his family left Saturday for a two-week vacation in Hawaii, his native state, but the advisers will take his guidance — including instructions to be “bolder”, according to one — and complete a draft in time for his return on Jan 2. The new Congress convenes on Jan 6. The House and Senate, with larger Democratic majorities, will work to pass a bill for Mr. Obama to sign shortly after his inauguration, on Jan 20.

The Obama blueprint covers five main areas of spending and tax breaks: health, education, infrastructure, energy, and support for the poor and the unemployed.
Mr. Summers said the president-elect set short- and long-term themes in choosing the plan’s components: “Creating jobs for people who need them, and doing things that need to be done to lay the foundation for an economy that works for middle-class families.”
At the meeting on Tuesday, Ms. Romer also laid out recommendations from private sector analysts and liberal to conservative economists for a government stimulus that ranged from $800 billion to $1.3 trillion over two years. Those consulted included Martin Feldstein, a conservative economist and longtime Republican presidential adviser, who is at the low end, and Lawrence B. Lindsey, a Federal Reserve governor and Bush administration economist, who has recommended up to $1 trillion.

Even before the election, Mr. Feldstein was publicly arguing that whoever was elected should immediately begin working with Congress on a big spending package. Since then, Mr. Feldstein has also been revising his assessment upward as the economy weakened further. “Without action,” he wrote in an e-mail exchange, “the economy will continue to decline rapidly.”
Many decisions about the details have not been made, or are tentative pending consultations with Congress. Several hundred billion dollars could go to states and cities to finance public works and subsidize their health and education programs so that local governments do not have to raise taxes and cut essential programs, steps that would be counterproductive economically.
The Obama team has a list of $136 billion in infrastructure projects from the National Governors Association that consists mostly of transit construction but also includes port expansions and renewable energy programs. For education, besides money to build and renovate schools, Mr. Obama will call for money to train more teachers, expand early childhood education and provide more college tuition aid.

Federal money to local governments would come with a “use it or lose it” clause under Mr. Obama’s plans, advisers say. The president-elect will also propose to direct some money to public and private partnerships for major projects like a national energy grid intended to harness alternative energy sources such as wind power.
For those “most vulnerable” because of the recession, as the Obama team describes the needy and jobless population, the president-elect will propose expanding the length of unemployment compensation, as well as food aid and additional support.
With millions more Americans losing their health care coverage, either through job losses or because they can no longer afford to pay for insurance, Mr. Obama will propose major new spending to subsidize states’ share of Medicaid and their children’s health programs, and to expand health care coverage for those who lose insurance from their employers.
Mr. Obama plans a down payment on his campaign promise to help pay for hospitals and other medical providers to computerize their health records to save billions in paperwork and administrative costs. He might also propose subsidies to train more nurses, both to create jobs now and address a looming shortage in the health professions.
Mr. Obama has spoken in recent days with the Senate majority leader, Harry Reid, and the House speaker, Nancy Pelosi. Last week, Mr. Reid’s office sent an e-mail message to senators saying that in conversations with the Obama transition team, “we have communicated our willingness to work within these parameters as closely as possible and urge all offices to do the same.”

By : Jackie Calmes

Re-Published By : The Author