President-elect Barack Obama warned yesterday that the United States risks sinking deeper into an economic crisis without an infusion of government spending and a cut in tax rates and urged Congress to act quickly on a stimulus package that may total $775 billion.
In a speech directed at lawmakers and the public, Obama drew a portrait of a nation where family income is falling, the unemployment rate is rising and a "generation of potential and promise" may be lost without federal action.
"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," he said in the address, delivered at George Mason University in Fairfax, Va. "If nothing is done, this recession could linger for years."
The bleak outlook seemed designed to prod Congress into moving fast to pass a stimulus package aimed at getting the economy going again, even as signs of resistance were emerging at the Capitol. The stakes are high: The United States is in the middle of a deep recession, and economists of all stripes agree that aggressive government action is needed.
Obama blamed the economy's troubles on "an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, D.C." Wall Street executives made "imprudent and dangerous decisions," banks offered and borrowers took loans without regard to whether they could be repaid, and politicians spent tax money "without wisdom or discipline," he said.
Obama, who takes office on Jan. 20, is proposing a two-year stimulus proposal that includes infrastructure spending aimed at creating or saving 3 million jobs and about $300 billion in tax cuts for individuals and businesses.
The president-elect didn't put a price tag on his plan, though he has said it will widen the federal budget deficit, which the Congressional Budget Office yesterday forecast would hit $1.18 trillion this year. Democratic officials have said Obama's target is a package of about $775 billion.
That would place it at the high end of the range the president-elect's advisers have been promoting and lower than the $1-trillion stimulus that some economists have called for.
Nobel laureate Joseph Stiglitz said Obama's plan is "not enough" because it puts too much into tax cuts rather than higher spending.
"Clearly more is going to be needed," Stiglitz, a professor at Columbia University in New York who advised Obama during the campaign, told reporters at a conference in Paris. "With a lot of the money going to tax cuts, they won't have the effect some would hope."
Republican congressional leaders said that while rapid action is needed on the economy, too big a spending package would cost Obama some party members' votes. "We have to address the economic crisis, but we also have to address how much debt we're going to build up," Senate Minority Leader Mitch McConnell, a Kentucky Republican, said.
Barack Obama discussed a number of economic stimulus ideas yesterday in a speech in Virginia. They include:
Doubling production of alternative energy in the next three years.
Modernizing more than 75 percent of federal buildings and improving the energy efficiency of 2 million American homes.
Investing to ensure that, within five years, all of America's medical records are computerized.
Equipping tens of thousands of schools, community colleges and public universities with 21st-century classrooms, labs and libraries.
Repairing crumbling roads, bridges and schools.
Providing a $1,000 tax cut to 95 percent of working families.