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Monday, January 5, 2009

Obama Readies Economic Recovery Plan

NEW YORK ( -- President-elect Barack Obama was set Monday to begin the push for a massive package of tax cuts and spending proposals aimed at reviving an economy mired in recession.

Obama will meet with top legislators from both parties including House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., as well as Senate Minority Leader Mitch McConnell, R-Ky., and House Minority Leader John Boehner, R-Ohio.

The plan will include about $300 billion in tax cuts for individuals and businesses, an aide to the transition told CNN. Obama has not publicly put a price tag on his overall stimulus plan, though his advisers have said they expect it to fall between $675 billion and $775 billion, 40% of which would be in tax cuts.

Obama offered his most detailed sketch yet of his proposal, which he called the American Recovery and Reinvestment Plan, in his weekly radio and video address on Saturday. He said he would propose to:

  • provide tax breaks to workers;
  • double renewable energy production and make public buildings more energy efficient;
  • rebuild crumbling roads, bridges and schools;
  • computerize the health care system;
  • and modernize classrooms, labs and libraries.

"Economists from across the political spectrum agree that if we don't act swiftly and boldly, we could see a much deeper economic downturn," Obama said. "That's why we need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term."

The main goal of his plan: to create 3 million new jobs. Most would come from the private sector, he said.

As Obama prepares to take office on Jan. 20, the country faces a series of severe economic and political challenges.

Nearly 2 million jobs were lost in the first 11 months of 2008 - the final government reading on the employment picture will be released on Friday - and the economy has stagnated. Investors suffered the worst year in stocks since the Great Depression, and foreclosures are rising while housing values are declining at record paces.

Virtually every state is facing a budget shortfall, forcing many to make plans to cut back on critical services and raise taxes.

To that end, Obama's advisers and lawmakers have said they expect his legislation to provide increased aid to states to pay for Medicaid, as well as a boost to unemployment benefits.

Many economists have called for stimulus spending to approach or even exceed $1 trillion if the government expects to successfully beat back one of the deepest downturns in more than two generations.

Some Democrats and Republicans have already raised red flags about the proposed plan's potential scope and the prospect of a rushed attempt to pass the legislation, which could be the most expensive spending bill in U.S. history.

The congressional timeline for the stimulus plan is not clear. Some Democrats had earlier said they wanted to have it ready for Obama to sign shortly after he is sworn in. It appears, however, that such a fast-track is not realistic.

"The urgency of this, everyone knows about," Reid said on NBC's "Meet the Press" on Sunday. "But I'm not going to have some false deadline [on it], whether it's February 1 or whatever it is. I want to make sure that all senators have some input in what goes on here and that we do it as quickly as we can."

A sharp debate is likely over several crucial questions. Will the proposed measures in fact boost the economy? What's the right balance between seeding short-term stimulus versus funding long-term projects? Will money intended to yield long-term dividends for the economy as a whole end up merely serving politically motivated agendas or pet projects?

Obama attempted to assuage some of those concerns on Saturday when he called for "vigorous oversight and strict accountability for achieving results." He stressed that his plan is not an attempt to "throw money" at the economy's problems.

"I am optimistic that if we come together to seek solutions that advance not the interests of any party, or the agenda of any one group, but the aspirations of all Americans, then we will meet the challenges of our time just as previous generations have met the challenges of theirs," Obama said.

- Additional reporting by CNN correspondent Kate Bolduan. To top of page