Obama economic team refines plan
Amid a drumbeat of grim economic reports, President-elect Barack Obama’s top economic advisors met Tuesday to refine plans for a massive stimulus proposal, promising the money would not go toward dubious pork-barrel projects.
Vice President-elect Joe Biden met with seven advisors for an hour here as Obama vacationed in Hawaii. With the incoming administration acknowledging the stimulus plan could cost as much as $775 billion over two years, Biden seemed intent on reassuring Americans the money would not be wasted.
Transition team advisors described plans to shore up decaying bridges, roads and schools that have long been neglected -- part of an effort to build a broad public consensus and win a swift victory in Congress. Obama’s team hopes the president-elect signs a stimulus bill soon after he is sworn in Jan. 20.
“It’s important for the American taxpayer to know that . . . this is not going to be politics as usual,” Biden told reporters. “And we will not tolerate business as usual in Washington.”
Biden singled out special-interest projects. “There will be -- I will say it again -- there will be no earmarks in this economic recovery plan,” he said. “I know it’s Christmas. I know it’s the Christmas season. But President-elect Obama and I are absolutely determined that this economic recovery package will not become a Christmas tree.”
Reviving the troubled economy has become the incoming administration’s central focus. Data released Tuesday underlined the severity of the economic slump. The Bush administration reported that gross domestic product had contracted by half a percentage point in the quarter ending Sept. 30, the largest decline since the third quarter of 2001, in the shadow of the Sept. 11 attacks.
Also, sales prices for existing homes fell 13% in November from the year before, probably the steepest price decline since the Depression, according to the National Assn. of Realtors. The median price for an existing home is now $181,300.
Anticipating a bleak year, retailers sent a letter to Obama’s team Tuesday proposing that up to $25 billion in stimulus money be set aside for sales-tax holidays stretched over 30 days in 2009. The federal government would use stimulus money to reimburse states for suspending sales taxes during these periods, under the plan laid out by the National Retail Federation.
“At this point it appears the economy is going to remain weak well into 2009,” said Rachelle Bernstein, a federation official. “So doing this can provide that additional boost that may be needed.”
At Tuesday’s meeting, Lawrence H. Summers, whom Obama has named director of the National Economic Council, said: “Without substantial policy action, we would almost certainly face the worst economic downturn since the Second World War. That’s why it is imperative that we take action to maintain demand, to maintain jobs, to maintain incomes.”
Biden reiterated that the incoming administration had revised its early goal of creating or saving 2.5 million jobs in the next two years. With economists projecting a grim year ahead, Obama recently raised the number to 3 million.
“Economists rarely agree, but on this score, there is overwhelming agreement that we need a robust and sustained economic recovery package,” Biden said. “There’s virtually no disagreement on that point with economists from left to right. The greater threat to the economy lies with doing too little.”
Part of the meeting was devoted to plotting strategy. Selling a costly bill to voters may be growing more difficult.
One potential complication is criticism of the $700-billion federal bailout package that has already been approved. Questions have arisen about how the money has been spent and whether it has made any improvements.
The Associated Press has reported that billions of dollars went to large banks that either can’t track precisely how the money was used or would not disclose that information.
In marketing the new proposal, Obama aides seem attuned to public perceptions that large federal outlays are often misspent. Advisors are putting out the message that stimulus money would go to only the most worthwhile projects.
Outlining the Obama team’s challenge, one economic expert said there would be enormous pressure on the new administration to fund projects. “Every interest group under the sun wants a piece of this, because they’re also hurting,” said Eugene Steuerle, vice president of the New York-based Peter G. Peterson Foundation. “It’s going to be hard to control.”