Democrats' Stimulus Plan May Reach $700B

Washington Post: Obama, Congressional Dems Are Talking About A Spending Package That Would Rival Financial System Bailout

(Washingtonpost.com)  This story was written by Lori Montgomery.

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Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years.

That amount, more than the nation has spent over the past six years in Iraq, would rival the sum Congress committed last month to rescuing the country's financial system. It would also be one of the biggest public spending programs aimed at jolting the economy since President Franklin D. Roosevelt's New Deal.

Hints of a hefty new spending program began emerging last week. New Jersey Gov. Jon Corzine (D), an Obama adviser, and Harvard economist Lawrence H. Summers, whom Obama has chosen to lead his White House economic team, both raised the possibility of $700 billion in new spending. Yesterday, Obama adviser and former Clinton administration Labor secretary Robert Reich and Sen. Charles E. Schumer (D-N.Y.) also called for spending in the range of $500 billion to $700 billion.

Transition officials would not confirm 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 Bush's tax cuts for the wealthy.

Last week, Goldman Sachs said it expects the economy to shrink even faster by the end of the year, at a 5 percent annualized rate. Meanwhile, the Dow Jones industrial average dropped 5.3 percent for the week; and the nation's largest bank, Citigroup, sought government assistance to avoid collapse.

While Obama has set a goal of creating or preserving 2.5 million jobs by 2011, his economic team -- whose members are scheduled to be formally introduced at a news conference today in Chicago -- have yet to decide how that would be accomplished or how much it would cost.

Still, Austan Goolsbee, a spokesman for Obama on economic issues who is in line to serve on the White House Council of Economic Advisers, yesterday acknowledged that Obama's jobs plan will cost substantially more than the $175 billion stimulus program he proposed during the campaign.

"This is as big of an economic crisis as we've faced in 75 years. And we've got to do something that's up to the task of confronting that," Goolsbee said on CBS's "Face the Nation." "I don't know what the exact number is, but it's going to be a big number." (Read more from Face The Nation)

Republicans quickly criticized the idea of such a vast initiative, saying Congress should instead cut taxes to spur economic growth.

"Democrats can't seem to stop trying to outbid each other -- with the taxpayers' money," House Minority Leader John A. Boehner (R-Ohio) said in a statement. "We're in tough economic times. Folks are hurting. But the American people know that more Washington spending isn't the answer."

With financial markets fluctuating wildly and unemployment rising, Democrats want to push a stimulus package through Congress in January and have it ready for Obama's signature when he takes office Jan. 20. Over the weekend, the president-elect announced that he had instructed his advisers to assemble a massive jobs program that also would make a "down payment" on much of his domestic agenda.

The plan would include new funding for public-works projects to repair the nation's crumbling infrastructure, as well as a fresh infusion of cash to promote green technology and alternative-energy sources. It also would include targeted tax cuts for working families, students, the elderly and job-creating businesses that Obama touted on the campaign trail.

It may not, however, include one of Obama's central promises: to repeal Bush's tax cuts for families earning more than $250,000 a year. Speaking on ABC's "This Week," David Axelrod, Obama's chief political strategist, said the president-elect is weighing whether to let the cuts for the wealthy expire on Dec. 31, 2010, as provided in current law. Such a delay would permit Obama to avoid raising taxes during a recession.

"He's committed to getting middle-class tax relief in the pipeline quickly, and there's no doubt that we're going to have to make some hard decisions in order to pay for the things we need, whether it is through repeal of those tax cuts for the very wealthiest or whether we simply allow it to -- allow those cuts to expire in 2010," Axelrod said.

The projected cost of an economic stimulus package has been rising steadily as economic conditions have worsened. Economists who were calling a few months ago for $150 billion in government spending to offset flagging demand elsewhere in the economy are now pushing for $500 billion or more. Adding tax cuts to the package is expected to increase its cost to the Treasury by as much as $200 billion, Democrats said.

Even some conservative economists have endorsed the larger numbers.

Harvard economist Martin Feldstein, the former director of the National Bureau of Economic Research and an adviser to Sen. John McCain's (R-Ariz.) presidential campaign, said he thinks the government should spend "a minimum of $300 billion a year for at least the next two years."

"The cumulative multi-year deficit would have to be about $700 billion or even more," Feldstein said in an e-mail yesterday.

Reich, speaking on CNN's "Late Edition," said the middle class is being squeezed by mountains of personal debt, plummeting home values and a vast tightening in available credit. As a result, he said, "there's not enough buying power in the economy," forcing the government to step in as "the spender of last resort."

In an interview, Schumer said the nation is on the brink of the same kind of deflationary spiral that pushed down prices, closed businesses and obliterated jobs during the Great Depression.

"The economy is in worse shape than people think," Schumer said. "The safest thing is to do anything you can to avoid deflation."

Even House Speaker Nancy Pelosi (D-Calif.), whose aides have in recent weeks balked at suggestions that Democrats might spend as much as $300 billion, conceded yesterday on "Face the Nation" that the price of a stimulus package is likely to be "in the several hundred billion dollar category."

There are downsides to such a dramatic increase in government spending, especially at a time when the annual federal budget deficit already is spiraling toward $1 trillion -- about 7 percent of the gross domestic product -- a level not seen since the end of World War II. Increasing the deficit means increasing the national debt, which eventually will have to be repaid, with interest, to largely foreign creditors. It also means the nation will be even less prepared to cover the skyrocketing costs of Medicare and Social Security as the baby boomer generation retires.

Washington also could overshoot its target, sparking rampant inflation when the economy recovers. Or the money could be poorly directed and fail to efficiently stimulate the economy.

"The 1930s recession became the Great Depression because policymakers didn't take the necessary actions. Nobody wants to make that mistake this time around," said Jared Bernstein, a senior economist at the Economic Policy Institute who has been advising Democrats. "Is there a possibility that we could overshoot? Of course. But from what I've seen, the danger is not doing enough."

[thcarson-2009]

During the administration of William Jefferson Clinton, the U.S. enjoyed more peace and economic well being than at any time in its history. He was the first Democratic president since Franklin D. Roosevelt to win a second term. He could point to the lowest unemployment rate in modern times, the lowest inflation in 30 years, the highest home ownership in the country''''s history, dropping crime rates in many places, and reduced welfare rolls. He proposed the first balanced budget in decades and achieved a budget surplus. As part of a plan to celebrate the millennium in 2000, Clinton called for a great national initiative to end racial discrimination.

Now crawl back under your rock.


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Posted by antoniof123

Hey moron, the part about the highest home ownership is a huge part of what is causing the current crisis, even Clinton admitted this.

[chloemontague]

Your future is here - Charlotte Iserbyt Speaking At The Zombie Country Conference , watch her very insightful talk - www.youtube.com/watch?v=PYNSXJbdchc

If you want to laugh, watch this ..
www.youtube.com/watch?v=1cbUlW5MMHE

[deathofusa]

Thats what the liberals know how to do is spend spend spend. Now where are you going to get the money to pay for this liberals? Ever think of that?
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Posted by Lady_Organs at 02:04 PM : Nov 24, 2008


Oh, they''ve thought of that. They are going to take the wealthy and corporations until they leave america. That''s how they''re going to pay for it.

[deathofusa]

He proposed the first balanced budget in decades and achieved a budget surplus. Posted by antoniof123 at 05:03 PM : Nov 24, 2008


He balanced the budget on the backs of our military and intelligence gathering capabilities which lead to 9/11. Great. Forget about balancing the budget, keep us safe.

[antoniof123]

Oh good grief, what jobs did Clinton create! The techno bubble created millions of jobs that got swept away before Clinton ever left office!
Posted by Rowdydfw at 04:41 PM : Nov 24, 2008

From the government web site: http://www.whitehouse.gov/history/presidents/bc42.html

The first paragraph reads:
During the administration of William Jefferson Clinton, the U.S. enjoyed more peace and economic well being than at any time in its history. He was the first Democratic president since Franklin D. Roosevelt to win a second term. He could point to the lowest unemployment rate in modern times, the lowest inflation in 30 years, the highest home ownership in the country''s history, dropping crime rates in many places, and reduced welfare rolls. He proposed the first balanced budget in decades and achieved a budget surplus. As part of a plan to celebrate the millennium in 2000, Clinton called for a great national initiative to end racial discrimination.

Now crawl back under your rock.

[omega40]

When a well paying job vanishes you lose that jobs contribution to the total GDP. You lose the payroll taxes to help support SS. You lose the federal, state and local taxes which that salary paid, and you lose the consumers purchasing power which that job provided.

They can talk about stimulus plans and spend the country into fiscal collapse. All will fail though until they are honest about the cost of outsourcing to this country.

[lady_organs]

Thats what the liberals know how to do is spend spend spend. Now where are you going to get the money to pay for this liberals? Ever think of that?

[inketolstoy]

"There are downsides to such a dramatic increase in government spending"

Thank you CBS reporter for your thoughtful insights.

[centerfall94]

!! you sound like mao tse tung

Posted by obamasNUTZ at 10:59 AM


..and you sound like... nobody I know.

That makes me rather happy. 8-)

[centerfall94]

and you are about as dumb as beheaded turkey to believe there is a difference between obama and mcain or palin and biden..

when it comes to politics..there is no difference..

Posted by obamasNUTZ at 11:07 AM

Why have an election then?

Because they are very different.

And you are very wrong.

Next!

[donbl1]

Politicians love these types of bills as they are the Mother of all PORK bills. Everything an individual congressman needs to buy votes will be in this bill.

This Congress puts politics before country.

Be wary be very wary.

[ioweign]

For you see.....Us real Americans don''''t believe the government can have a "surplus".....

The only money the government receives is what it confiscates from "We the people."

You Dumboturds simply enjoy dropping your pants, bending over and grabbing your ankles more than we real Americans do.

Posted by Obama_Dkhed at 10:32 AM : Nov 24, 2008

It is quite evident you Republicans do not believe in surpluses.

You are responsible for 90 percent of the National Debt.

Bush doubled the National Debt in his 8 years to $10+ trillion.

Clinton actually put money to pay down some of the National Debt.

[o2brich]

And so it begins. All those folks out there who bought into Obama%u2019s rhetoric about McCain being no more than four more years of Bush %u2013 now you can see that Obama%u2019s %u201Cchange%u201D was nothing at all. Empty rhetoric. Package the same, tired old political white-wash into a young, charismatic democrat and get elected. Bush%u2019s big disservice was that he made it easy for Obama to use this strategy and now we%u2019re all saddled with someone who is nore more than another mediocre politician, unwilling to make the hard decisions necessary to really turn the economy around. So brace yourselves, folks. You%u2019re in for four more years of the same old stuff from our elected officials.