Obama’s economic strategy to create 4.1m jobs – Advisers
President-elect Barack Obama countered critics with an analysis Saturday by his economic team showing that a program of tax cuts and spending like he’s proposed would create up to 4.1 million jobs, far more than the 3 million he has insisted are needed to lift the country from recession.
Congressional Republicans reacted skeptically, just as Obama acknowledged that he would be forced to recant some of his campaign promises given the economic crisis facing the country. Even the president-elect’s own economists acknowledged their two-year estimates could be wrong.
The 14-page analysis, which was posted online, says estimates are “subject to significant margins of error” — because of the assumptions that went into the economic models and because it is not known what might pass Congress.
“These numbers are a stark reminder that we simply cannot continue on our current path,” Obama said in his weekly radio and YouTube broadcast address.
“If nothing is done, economists from across the spectrum tell us that this recession could linger for years and the unemployment rate could reach double digits — and they warn that our nation could lose the competitive edge that has served as a foundation for our strength and standing in the world,” he said.
Obama has provided few details of his $775 billion plan so far. This fresh report does not include the specific construction of his tax cuts, the amounts dedicated to state aid or public works — key questions that Obama aides have closely held.
On Saturday, economic aides and advisers declined to lay out even rough estimates for the plan’s components. They said they worked with broad instructions from Obama but didn’t want to limit negotiations with congressional leaders by outlining their limits in public.
“I want to be realistic here. Not everything that we talked about during the campaign are we going to be able to do on the pace we had hoped,” Obama told ABC’s “This Week” for an interview set to air Sunday.
For a second time since his election, Obama increased the number of jobs his jobs program would create, taking the number to as many as 4.1 million jobs saved or created — a benchmark his critics charge cannot be measured. During the campaign, he promised only 1 million new jobs.
The analysis came out one day after news the unemployment rate had jumped to 7.2 percent, the highest in 16 years. The nation lost 524,000 jobs in December, bringing the total job loss for last year to 2.6 million, the largest since World War II.
GOP lawmakers have insisted on carefully targeting any aid and on a politically popular tax cut for the middle class, as well as loans to states.
“We want to make sure it’s not just a trillion-dollar spending bill, but something that actually can reach the goal that he has suggested,” said Sen. Mitch McConnell of Kentucky, the Senate’s top Republican.
Obama’s plan has met with lukewarm support from lawmakers in general, despite economic news that has dominated the new administration even before it begins.
In hopes of having the new president gain immediate access to bailout money already approved by Congress when he takes office Jan. 20, his economic team and the Bush administration have discussed the possibility that Treasury Secretary Henry Paulson would ask lawmakers soon for access to the $350 billion remaining in the Wall Street rescue fund.
The transition team also has asked the head of the rescue program at the Treasury Department to remain in that position for a short time after the inauguration to help assure a smooth transition, according to an Obama official.
If Congress fails to enact a big economic recovery plan, Obama’s advisers estimate that an additional 3 million to 4 million jobs will disappear before the recession ends. Obama’s team also noted that with or without the plan, the jobless rate by 2014 would be the same.
The president-elect agreed on Friday to modest changes in his proposed tax cuts. Democratic congressional officials said his aides came under pressure in private talks to jettison or significantly alter a proposed tax credit for creating jobs, and to include relief for upper middle-class families hit by the alternative minimum tax.
The new report is likely to intensify debate as economists outside the Obama team begin delving into the analysis. The report, for example, estimates that the unemployment rate at the end of 2010 would be 1.8 percentage points lower if the plan is enacted.
Top Democrats on Capitol Hill say there is far more agreement than disagreement on the major parts of the recovery plan: aid to cash-strapped state governments, $500-$1,000 tax cuts for most workers and working couples, and a huge spending package blending old-fashioned public works projects with aid to the poor and unemployed and a variety of other initiatives.
But it needs restrictions, Republicans say, to ensure prudent spending.
University of Maryland economist Peter Morici said the analysis attempted an economic justification for a political decision. He said evidence suggests that working class families would spend the modest tax credits — $500 per individual or $1,000 per family — on low-cost, imported products that do little for the U.S. economy. He also said state and local governments don’t need as much aid as Obama is proposing.
“They should stick to the infrastructure spending” in the plan and jettison much of the rest, Morici said in an interview, because that is the most likely proposal to provide a short-term economic boost and long-term benefits.
Source: AP