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Obama Faces Big Test Over Ailing Economy

President Barack Obama speaks to reporters during his meeting with Democratic and Republican leaders, Friday, Jan. 23, 2009, in the Roosevelt Room of the White House. (AP Photo/Charles Dharapak)
AP Photo/Charles Dharapak
Barack Obama heads into his first full week as president with a growing agenda as he tries to turn back the Republican challenge to his $825 billion economic stimulus plan and to promote his clean energy policy.

Mr. Obama is expected to let California and other states set their own stringent auto emission standards in their drive to slash greenhouse gases, an official familiar with the decision said Sunday.

The announcement is likely Monday, according to the official, who spoke on condition of anonymity because the plan had not yet been formally announced.

Mr. Obama also was expected to direct the Transportation Department to work out rules for automakers to improve fuel economy.

The moves would mark further reversals by Mr. Obama of policies set down by his predecessor, George W. Bush.

Last week's blitz of executive orders included Mr. Obama's declaration to close the Guantanamo Bay military prison within a year.

Maintaining the administration drumbeat in support of the massive spending package, Vice President Joe Biden said "we are off and running," during an interview with CBS' Face The Nation Sunday.

However, Biden admitted that the economic situation is worsening every day. "There has been no good news," he admitted.

Mr. Obama was expected to spend a good part of this week focusing on the downward spiraling U.S. economy - the loss of 2.6 million jobs last year, manufacturing at a 28-year low and one in 10 homeowners at risk of losing their home.

Even Mr. Obama's economic experts forecast unemployment numbers that could climb above 10 percent before the recession ends.

While some Democratic allies complain that the stimulus package - already unprecedented in size - is too small, his biggest challenge comes from Republicans who believe the measure leans too heavily toward government spending and does too little to cut taxes.

"We have already had a lot of bipartisan support," Biden argued, saying that the bill expected to come out of the Senate includes elements to satisfy (or dis-satisfy) both Republicans and Democrats. "Roughly forty percent of this entire package is tax cuts - that is not what the Democrats wanted - and sixty percent is spending, economic stimulus - not what the Republicans wanted. But we have come a pretty long way already.

"We are trying to get money out of the door as rapidly as possible," Biden said.

Hoping to change their minds, Mr. Obama was to travel to Capitol Hill on Tuesday for private meetings with the Republican leadership.

While the Democrats hold sizable majorities in both the House and the Senate, Mr. Obama wants bipartisan support for a stimulus plan that will send the American budget deficit above $2 trillion in the first years of the new administration.

Mr. Obama's plan calls for 75 percent of the funds to be spent within the first 18 months of its enactment, CBS News chief White House correspondent Bill Plante reports.

Sen. John McCain, Mr. Obama's opponent in the November presidential contest, said Sunday he did not believe the stimulus package would do enough to create jobs.

"There have to be major rewrites if we want to stimulate the economy. ... As it stands now, I can't vote for it," McCain said on Fox television.

And John Boehner, the Republican leader in the House, restated his criticism of the plan's configuration.

"I just think there's a lot of slow-moving government spending in this program that won't work," Boehner said. "We can't borrow and spend our way back to prosperity."

Boehner spoke on NBC television, shortly after Mr. Obama's chief economic adviser, Lawrence Summers, defended the spending plan on the same program.

Summers said Mr. Obama was trying to balance Republican objections with the desire of some fellow Democrats who want even more federal spending.

Summers said Americans must remember that while the stimulus was intended to jolt the economy toward recovery, "these problems weren't made in a day or a week or a month or even a year, and they're not going to get solved that fast."

"The next few months are, no question, going to be very, very difficult, and, and it may be longer, it may be longer than that," Summers said in one of the gloomier discussions of the crisis gripping the United States.

House Speaker Nancy Pelosi said she could envision even more money for the financial sector - beyond the $700 billion Congress already appropriated - so long as the government, on behalf of taxpayers, takes an ownership stake in banks that receive the money.

She mentioned no dollar figure and refused to use the term "nationalization" when referring to additional rescue dollars.

Already $350 billion has gone out to banks and financial institutions under the just-departed Bush administration, and the second $350 billion installment is now in the hands of the Obama administration, which is promising tougher standards on how the money is used.