Washington: To shore up the tottering US economy, President-elect Barack Obama and the Democrats are planning a new massive fiscal stimulus package that could run into as much as $700 billion over the next two years, rivalling the bailout sum Congress committed last month.
Hints of a hefty new spending programme began emerging last week.
New Jersey Governor Jon Corzine, an Obama advisor and Harvard economist Lawrence H Summers, whom the President-elect has chosen to lead his White House economic team, raised the possibility of $700 billion in new spending.
Obama advisor and former Clinton administration Labour Secretary Robert Reich and Democrat Senator Charles E Schumer also favoured spending in the range of $500 billion to $700 billion, the Washington Post reported on Monday.
The amount, if approved, will be one of the biggest public spending programmes aimed at boosting the economy since former President Franklin D Roosevelt’s ‘New Deal´, it said.
Transition officials did not confirm to the paper that they are considering spending of that magnitude, but they made clear that economic conditions are dire and suggested that Obama might be forced to delay his pledge to repeal President George W Bush’s tax cuts for the wealthy.
While Obama has set a goal of creating or preserving 2.5 million jobs by 2011, his economic team have yet to decide how that would be accomplished or how much it would cost.
Austan Goolsbee, a spokesman for Obama on economic issues who is in line to serve on the White House Council of Economic Advisers, on Sunday acknowledged that Obama’s jobs plan will cost substantially more than the $175 billion stimulus programme he proposed during the campaign.
Republicans were quick to flay the idea of such a vast initiative, saying Congress should instead cut taxes to spur economic growth.
The Wall Street Journal also reported that Obama’s team is putting together a new economic stimulus plan containing more than $500 billion in federal spending and tax cuts over the next two years, a package far more aggressive than anything envisioned during the campaign.
Democratic leaders in Congress are preparing to rush passage shortly after New Year’s to have a stimulus-plan bill ready for Obama to sign once he is inaugurated 20 January, it quoted Obama aides and advisors as saying.
Meanwhile, Bush’s outgoing Treasury secretary, Henry Paulson, is now considering a more activist stance in his final weeks in office than he had signalled as recently as last week, the paper said.
He is considering tapping the second half of the government’s $700 billion financial-industry rescue fund, and rolling out new programmes in response to worsening market conditions, the Journal reported citing people familiar with the matter.