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Obama Aides Signal a Boost in Stimulus Spending

Discussion in 'Political Zone' started by Heisenberg, Nov 23, 2008.

  1. Heisenberg

    Heisenberg Pow! Pow!

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    http://www.nytimes.com/2008/11/24/us/politics/24transition.html

    November 24, 2008
    Obama Aides Signal a Boost in Stimulus Spending
    By JACKIE CALMES and JEFF ZELENY

    WASHINGTON — President-elect Barack Obama has signaled that he will pursue a far more ambitious plan of spending and tax cuts than anything he outlined on the campaign trail — a plan "big enough to deal with the huge problem we face,” a top adviser said Sunday — setting the tone for a recovery effort that could absorb and define much of his term.

    A member of the Obama economic advisory team, William M. Daley, acknowledged that because of the gravity of the situation, Mr. Obama was leaning toward letting a Bush tax cut for the wealthy expire on schedule in 2011 rather than repealing it sooner.

    There were hints Sunday that a stimulus package might be extraordinarily large. Austan Goolsbee, a senior Obama economic adviser, charged that the Bush administration had “dithered” as the economy turned down and suggested that the incoming administration would take dramatic action.

    “We’re out with the dithering, we’re in with a bang,” he said on CBS. A senior Democrat, Senator Charles Schumer of New York, said that any package should be as much as $700 billion, equivalent to the recent financial bailout plan.

    In the Democrats’ weekly radio address, Mr. Obama said that he would direct his economic team to craft a two-year stimulus plan with the goal of saving or creating 2.5 million jobs.

    “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,” David Axelrod, a senior adviser to the president-elect, said on “Fox News Sunday."

    When asked if the tax cuts might be allowed to expire on schedule, Mr. Axelrod replied: “Those considerations will be made.”

    In an inauguration year Congress usually convenes in early January, a few weeks before the inauguration, then members leave again. This year, however, they intend to stay and work in anticipation of the president’s inauguration and the heavy agenda he is expected to bring.With the economy likely to get worse before it gets better, Mr. Axelrod said, “We want to hit the ground running on Jan. 20,” the day of Mr. Obama’s inauguration. He said a plan should be “big enough to deal with the huge problem we face.”

    Mr. Obama said Saturday that he hoped to sign the stimulus package into law soon after taking office. He is already coordinating efforts with Democratic leaders in Congress.

    But some members of Congress said Sunday that even that might not be soon enough — Senator Joseph I. Lieberman, independent of Connecticut, said that President Bush and Mr. Obama should work together now to put a stimulus package in place by early next year. Otherwise, he said, the Obama approach would probably take until the second quarter of next year, “and that’s too long.”

    Advisers to Mr. Obama say they want to use the economic 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 “green jobs” through business incentives for energy alternatives and environmentally friendly technologies.

    In light of the downturn, Mr. Obama is also said to be reconsidering a key campaign pledge: his proposal to repeal the Bush tax cuts for the wealthiest Americans. According to several people familiar with the discussions, he might instead let those tax cuts expire as scheduled in 2011, effectively delaying any tax increase while he gives his stimulus plan a chance to work.

    That approach, Mr. Daley said on NBC’s “Meet the Press,” “looks more likely than not.”

    On Monday morning in Chicago, Mr. Obama plans to hold his second news conference since the election to introduce his economic team, led by his Treasury secretary, expected to be Timothy F. Geithner. News that Geithner, the president of the Federal Reserve Bank of New York, would get the job helped send the stock market up by nearly 500 points on Friday after days of sharp losses.

    Former Treasury Secretary Lawrence H. Summers is to be the director of the National Economic Council in the White House, the president’s principal economic adviser and policy coordinator, according to an Obama aide.

    Mr. Axelrod appeared to tacitly confirm those two nominations, though he said that another widely reported nomination, that of Governor Bill Richardson as commerce secretary, might be premature.

    Referring to the stimulus plan being prepared, Mr. Axelrod said, “We need the best people we can find, the best minds in our country to help us accomplish that plan, and people like Tim Geithner and Larry Summers are among those people.”

    Mr. Obama, in his address, underscored the economic challenge facing the new team. “The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions,” he said. “We now risk falling into a deflationary spiral that could increase our massive debt even further.”

    Senator Schumer used a similar argument on Sunday in calling for a stimulus package of $500 billion to $700 billion. “We’re on the edge of deflation,” he told ABC’s “This Week.” “Once you get into deflation you almost never get out.”

    Mr. Goolsbee, asked about the possibility of so large a package, declined to offer numbers but agreed that “the problem is very, very serious” and suggested that the package would be considerable. He noted on CBS that Mr. Obama had spoken during his campaign of a $175 billion package, then added, “and the economy has gotten substantially worse since then.”

    The new economic team, in addition to Mr. Geithner and Mr. Summers, will include Peter Orszag, the head of the Congressional Budget Office, who will be the next White House budget director.

    Mr. Summers, who served as a campaign adviser to Mr. Obama, has advocated for a forceful stimulus plan in recent newspaper columns, saying the federal government should be doing more, not less, in areas like health care, 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,” Mr. Obama said, “but it will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. 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.”

    Mr. Obama’s announcement came after market declines and the prospect of a collapse by automakers and other storied companies had sparked growing criticism last week that he was sitting on the sidelines.

    The $175 billion stimulus plan that Mr. Obama proposed in October included a $3,000 tax credit to employers for each new hire above their current work force and billions in aid to states and cities.

    Separately, Democratic leaders in Congress have been calling for a robust economic recovery initiative of up to $300 billion, including major investments in infrastructure to create jobs. President Bush has refused to consider a package so large, but 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,” Mr. Obama said Saturday. “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 Mr. 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 now provides, Mr. 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 economic and political benefits. Mr. 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. His Republican presidential rival, Senator John McCain of Arizona, had raised that argument during the campaign.

    By letting the tax cuts expire, Mr. 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 majority in Congress having to vote on a tax increase.

    Also, Mr. 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.

    Mr. Bush and the Republicans who controlled Congress in 2001 agreed that his tax cuts would expire after 10 years as a way of minimizing the projected revenue losses in future years, to comply with congressional budget rules and to help pass the legislation. The president repeatedly called for making the tax cuts permanent, but no action was taken.

    The 2.5 million jobs that Mr. 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 the reverse if Mr. Obama’s plans become law.

    Nearly every spending program and tax cut that Mr. Obama proposed during the campaign could end up in the stimulus package, advisers indicated. For example, Mr. Obama’s proposals to invest in energy alternatives and advanced “green” technologies will most likely be part of the package, rather than proposed later in his administration.

    In effect, the stimulus will be seen by the Obama administration as “a down payment,” as one adviser put it, on Mr. Obama’s entire domestic platform, allowing him to try to take maximum advantage of the first year of his presidency. Traditionally, the first year is the one in which modern presidents have achieved most of their major victories.

    Some economists welcomed Mr. Obama’s plan, though they said it was difficult to assess without full details. The focus on creating and saving jobs made sense, they said, given the deterioration of the job market.

    “The unemployment rate is soaring,” possibly into the double digits, said Kenneth Rogoff, an economics professor at Harvard.

    The Senate majority leader, Harry Reid, Democrat of Nevada, said in a statement, “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 big stimulus package in the Senate, as Mr. Obama seemed to recognize.

    “I know that passing this plan won’t be easy,” Mr. 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 is the need for immediate action.”
  2. theogt

    theogt Surrealist Zone Supporter

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    That's good, but it's almost too late.
  3. Aikbach

    Aikbach Active Member

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    I'll applaud measures that reward the private sector for remaining private, please no more bail outs or new deal styled work projects.
  4. Rogah

    Rogah Well-Known Member

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    Increased spending and tax cuts, increased spending and tax cuts.

    Meet the new boss. Same as the old boss. :(
  5. Viper

    Viper Active Member

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    I hate increasing spending, however that is exactly what needs to be done along with tax cuts. At least this is what I was taught when we have an economic slowdown.
  6. Rogah

    Rogah Well-Known Member

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    Except we never repay the loans we've taken out to increase spending. I would rather the nation took a well-deserved dose of medicine and we returned to fiscal responsibility instead of further accumulating a debt that is spiralling out of control exponentially.
  7. theogt

    theogt Surrealist Zone Supporter

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    You're right, we just let economic growth and inflation eat it up. That's the value of being the least riskiest borrower in the world.
  8. Rogah

    Rogah Well-Known Member

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    One of the things I am afraid of is that if things keep going the way they are, we will no longer be the least riskiest borrower in the world. And if that ever happens, then the sh*t will really hit the fan.

    We got the debt under control in the 90's, but I think we can all agree the rate of debt increase from the past administration has outpaced economic growth and inflation over the past 8 years. If we don't fix things, God help our children.
  9. theogt

    theogt Surrealist Zone Supporter

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    Yeah, people were worried that the US was losing its status as the reserve currency, but as we found out in the past couple of months, there's one asset buyers run to in times of crisis - US treasuries.

    Actually, this is a common misconception. Deficit spending over the past 7 years has been extremely moderate.

    From 2001 to 2007 (as a percentage of GDP):

    1.27%
    -1.51%
    -3.44%
    -3.53%
    -2.56%
    -1.88%
    -1.16%
  10. Rogah

    Rogah Well-Known Member

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    Do you have any source for this data? I honestly did not know this and I would be interested in reading the full report behind those numbers.
  11. theogt

    theogt Surrealist Zone Supporter

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    http://www.cbo.gov

    http://www.bea.gov

    I just did some quick math based on deficit/surplus numbers from the CBO and GDP numbers from the BEA.
  12. burmafrd

    burmafrd Well-Known Member

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    Still we COULD have a balanced budget if we could get some control on the spending in entitlements. But the way they keep going up I do not see how.
  13. jimmy40

    jimmy40 Well-Known Member

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    Now if you could fix the BCS.

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