Obama sets sights on 2.5 million jobs by 2011

Stimulus would target nation's infrastructure, green technology

November 23, 2008|By From Sun news services

WASHINGTON - President-elect Barack Obama signaled yesterday that he will quickly seek a sweeping economic recovery plan likely to exceed the price tag of the $175 billion plan that he unveiled during the campaign.

A "crisis of historic proportions" is gripping the nation, Obama said, and it calls for "a plan big enough to meet the challenges we face." Obama has asked his economic team to craft a plan to create 2.5 million jobs over the next two years, including some in the field of alternative energy - a two-year stimulus reaching further than his original one-year-plan. With hope of signing it soon after taking office, he plans to seek quick congressional approval.

"These aren't just steps to pull ourselves out of this immediate crisis," Obama said in his weekly radio address. "These are the long-term investments in our economic future that have been ignored for far too long." The announcement of a more robust stimulus plan comes amid worsening economic news over the past several weeks, with financial markets in turmoil and new home purchases hitting their lowest point in 50 years last month. In his address, Obama noted the risk of a deflationary spiral and its potential to increase the nation's debt.

In light of the recession, Obama is also 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.

Just over a month ago, Obama unveiled a proposal to help employers, automakers, homeowners and state and local government weather the economic storm, with advisers placing a $175 billion price on the plan.

At a campaign event in Toledo, Ohio, Obama proposed a $3,000 tax credit for employers for each new person they hire. He said he would eliminate income taxes on unemployment benefits, double the government's loan guarantee for automakers and allow people to borrow from retirement savings without a tax penalty, regardless of their age.

But in yesterday's address, Obama said he believes the economy has deteriorated to a point of crisis and introduced new ideas that he hadn't mentioned before. Aides to the president-elect acknowledged that Obama was widening the scope of his plan and that it would probably cost more than the $175 billion discussed before the election.

One new detail is the targeted number of 2.5 million jobs that he wants to create by 2011. He also speaks now of making it a two-year plan.

"It's consistent with what he said before," one Obama aide said, "because of the prolonged deterioration in the economy." Another addition is investment in green technology. Obama has long talked about spurring job creation by putting $150 billion into alternative energy to spur creation of 5 million jobs, but not as part of his rescue plan.

Yesterday, though, he listed green jobs prominently among the investments he thinks the government should make in a stimulus plan.

"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.

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 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. His Republican presidential rival, Sen. John McCain, had raised that argument during the campaign.

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 revenue 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.

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