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.
President George W. 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. Bush repeatedly called for making the tax cuts permanent, but no action was taken.
With Obama expected to officially announce key members of his economic team in the next few days, possibly as early as tomorrow, he plans to ask them to start drafting the stimulus package.
Obama is expected to name Timothy Geithner, head of the Federal Reserve Bank of New York, as his nominee for treasury secretary. He has also settled on Gov. Bill Richardson of New Mexico as his commerce secretary, and Congressional Budget Office chief Peter Orszag is his likely choice for White House budget director.
Tomorrow, the president-elect will emerge from two weeks of near-seclusion to stand shoulder-to-shoulder with his economics team for a news conference that aides hope will help restore calm to an anxious public.
Obama's aggressive posture marks an evolution inside his transition team since the immediate aftermath of the Nov. 4 election, when he pledged to live by a mantra that the country is led by "one president at a time."
The shift comes as Obama and his aides have been discussing how hands-off he should be now that circumstances are changing so quickly, with stocks tumbling, negotiations stalling over an economic stimulus plan and a possible automobile industry bailout, and another financial giant, Citigroup, at risk.
The quandary for Obama has been how to finesse a set of challenges not seen since 1932: a quickly deteriorating economy and a transition of power between two presidents with vastly different views on how to fix it. Aides are wary that further declines will make the new president's job harder, but they also do not want to take ownership of problems they do not yet have the formal power to fix.
"They recognize it's a careful balancing act because you want to bring a whole new face to it when you're in office," said Leon E. Panetta, a former White House chief of staff under President Bill Clinton who has been an informal adviser to Obama's aides and has had conversations with them in recent days. "But at the same time, there's an underlying concern that things seem to be deteriorating rapidly."
Panetta said the country is "caught between a president who doesn't have a lot of credibility even if he tries to do something, and a new president who, if it looks like he's going to lay out things he's going to try to do, it looks like he's putting the cart before the horse." He added, "It's a tough place for the country to be in right now."
With the financial markets and the public clearly looking for reassurance, yesterday's announcement - and tomorrow's news conference - signal that the transition has entered a phase in which the president-elect will become more visible and vocal. Obama has yet to stake out a firm position on the auto bailout being discussed on Capitol Hill, but he could as he takes questions tomorrow on his ideas to reverse the country's economic woes.
Some economists welcomed 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 S. Rogoff, a professor of economics at Harvard. Sen. 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 big 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."
The Chicago Tribune, Los Angeles Times and New York Times contributed to this article.