Obama plans mega stimulus

The Straits Times
Nov 24, 2008 | 9:53 AM
Obama plans mega stimulus

WASHINGTON - PRESIDENT-ELECT Barack Obama is constructing a gigantic economic stimulus package far in excess of the US$175 billion (S$268 billion) he promised during the campaign, hoping the new Congress will have it ready for his signature as he takes office Jan 20 in the midst of the most severe US financial crisis in eight decades.

Top aides said Sunday that Mr Obama also wants the next Congress to use its large Democratic majority when it convenes Jan 6 to prepare tax cuts for low-and middle-income earners as part of the massive government intervention designed to pull the country out of its frightening economic nosedive.

The aides said, however, the plan would not offer an immediate tax increase on wealthy taxpayers. During the campaign, Mr Obama said he would pay for increased tax relief by raising taxes on people making more than US$250,000.

'There won't be any tax increases in the January package,' said one Obama aide, who spoke on condition of anonymity because the details of the Obama package have not been fleshed out.

Instead, Mr Obama could let taxes on upper-income families increase when the current Bush administration tax cuts expire in 2011.

Obama senior adviser David Axelrod unambiguously voiced Mr Obama's expectations.

'Our hope is that the new Congress begins work on this as soon as they take office in early January, because we don't have time to waste here,' he told Fox News. 'We want to hit the ground running on Jan 20th.'

Congress will have two weeks to hold hearings and write legislation between its return to Washington in early January and Obama's inauguration.

Representative Steny Hoyer of Maryland, the second-ranking Democrat in the House of Representatives, acknowledged a readiness for quick action.

'We expect to have during the first couple of weeks of January a package for the president's consideration when he takes office.'

Mr Axelrod also warned executives of the nation's auto industry to draw up plans to retool and restructure their industry if they want the billions of dollars they are seeking from Congress. Otherwise, Axelrod said, 'there is very little taxpayers can do to help them.'

Obama advisers would not discuss a specific size of the new economic stimulus, though economists have called for spending as much as US$600 billion to shock the economy back onto a positive trajectory.

'I don't know what the number is going to be, but it's going to be a big number,' Obama economic adviser Austan Goolsbee said on CBS television.

'It has to be. The point is to, kind of, get people back on track and startle the thing into submission.'

Mr Obama also delved into one of the most pressing foreign policy issues facing his presidency, calling Afghan President Hamid Karzai by telephone and telling him that fighting terrorism there and in the region would be a top priority, Karzai's office said on Sunday.

The Saturday conversation between Mr Obama and Mr Karzai was the first reported contact between the two leaders more than two weeks after the Nov 4 US election.

The United States has some 32,000 American troops in Afghanistan, a number that will be increased by thousands next year.

Fighting terrorism and the insurgency 'in Afghanistan, the region and the world is a top priority,' Mr Karzai's office quoted Mr Obama as saying during the conversation.

On the domestic front, Mr Axelrod confirmed that the president-elect would name Mr Timothy Geithner, the New York Federal Reserve president, as his treasury secretary on Monday. Mr Axelrod spoke on Sunday on Fox News and ABC television.

'The response has been great, and it should be - Mr Tim Geithner is uniquely qualified to do this job,' Mr Axelrod said in response to the jump in stock prices on Friday when word of Mr Geithner's appointment began to leak.

The market had just endured several days of steep losses.

The Geithner news followed in one-two fashion Mr Obama's declaration on Saturday that his administration planned to create 2.5 million jobs over the next two years.

Mr Geithner will team with Lawrence Summers, a treasury secretary under former President Bill Clinton and former Harvard University president, who will take over the National Economic Council.

The men will confront an economic crisis that continues to deepen in spite of hundreds of billions of dollars in federal emergency spending in recent weeks.

Word of Mr Geithner's likely selection Friday helped send the Dow Jones industrials soaring 6.5 per cent. Both Mr Geithner and Mr Summers will appear with Mr Obama at a Monday news conference in Chicago.

Also on Sunday, a Democratic official said Mr Obama would name New Mexico Governor Bill Richardson as commerce secretary, adding a prominent Hispanic and one-time Democratic presidential rival to his Cabinet.

Mr Obama planned to announce the nomination after Thursday, the Thanksgiving holiday, according to a Democratic official familiar with the discussions. The official was not authorised to speak publicly about the negotiations and did so on condition of anonymity.

Mr Richardson served as UN ambassador in the Clinton administration and later as energy secretary.

He is a seasoned international negotiator who mediated with North Korea over the downing of two US Army helicopter pilots; hammered out a deal with Iraqi leader Saddam Hussein for the release of two US oil workers; and was later sought out by the North Koreans to discuss nuclear issues.

On Saturday, Mr Obama named longtime spokesman Robert Gibbs as White House press secretary. Mr Gibbs was communications director while Mr Obama was in the Senate.

The president-elect is virtually certain to offer Congressional Budget Office chief Peter Orszag the job of directing the White House Office of Budget and Management, and Mr Orszag is likely to accept, Democratic officials said on Saturday. -- AP