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Obama ups the ante on stimulus

Its price tag more than triples in reaction to grim new warnings. More jobs are the linchpin of his strategy.

December 21, 2008|Peter Nicholas

WASHINGTON — Warned that the economy may get considerably worse, President-elect Barack Obama has more than tripled the size of the economic stimulus package he embraced during the campaign and is aiming to create or save 3 million jobs, up from 2.5 million, transition officials said Saturday.

Obama's team is crafting a massive new economic stimulus package to reach his revised job goal. Though the president-elect has declined to specify the amount, transition aides told Capitol Hill staff last week that the plan may cost $675 billion to $775 billion over two years.

Those numbers far exceed the package Obama laid out during the campaign -- underscoring a growing worry that the economy is in a tailspin. As recently as mid-October, Obama was touting a stimulus of about $175 billion.

Summarizing the incoming administration's view, Vice President-elect Joe Biden said in an interview with ABC's George Stephanopoulos to air today that the economy is at risk of "absolutely tanking."

Obama met privately with top economic advisors Tuesday and received a sobering briefing. Aides warned that without an aggressive recovery plan, the economy could lose as many as 4 million jobs through 2011 and the national unemployment rate could rise above 9%. Unemployment last month reached 6.7%, the highest level in 15 years. The last time the jobless rate topped 9% was in 1983, during President Reagan's first term.

Christina D. Romer, incoming chairwoman of the Council of Economic Advisors and an expert on the Great Depression, told Obama that forecasts over the short and long term had darkened in recent weeks and that looming economic troubles eclipsed anything seen in the last 50 years, transition officials said.

Confronted with that prospect, Obama said the job creation figure he announced in a weekly radio address last month -- 2.5 million -- would not be enough to avert disaster. He called for creating or preserving an additional 500,000 jobs over the next two years.

Since his election, Obama has heard nothing but dire reports about the economy he's about to inherit. In November, employers eliminated 533,000 jobs, the most since 1974.

His call for a more ambitious plan to create and retain jobs may involve a bit of psychology.

Consumers fearful of losing their jobs are inclined to stop opening their wallets, which dampens consumer spending. With Obama pledging to aggressively save jobs as well as create new ones, he is sending a message that people need not worry about being out of work, one economic advisor said. That, in turn, could encourage spending and bolster the economy.

"The big fear people have is loss of jobs. That's haunting the whole economy," said the advisor, who was not authorized to speak publicly and spoke on condition of anonymity. "People are holding back from buying because of fear of job loss. So presumably, if people hear the goal is to create or preserve 3 million jobs, layoffs aren't quite as scary."

Obama's plans to revive the economy hinge on the passage of his stimulus package, which Congress plans to take up Jan. 6.

Though he has the votes in the House, the Senate is another matter.

Republican senators could delay or derail it with a filibuster. Republican leaders have voiced skepticism about the stimulus, warning that there must be a thorough public vetting for such an expensive measure.

They've also vowed to oppose any plan that includes pork barrel projects meant to reward special interests.

Republicans derisively cite as an example a proposal by U.S. mayors that includes a $1.5-million initiative to chase prostitutes from Dayton, Ohio.

To reassure skeptics and build a durable coalition, Obama is insisting that the stimulus package meet certain standards, transition officials said. The bill must:

* Underwrite projects that will produce jobs without delay.

* Avoid pet projects put in by lawmakers to reward special interests.

* Fund programs based on objective evidence rather than on partisan considerations.

* Allow for public debate.

Some economists say Obama's new job goals may be rooted in salesmanship. It is virtually impossible to quantify jobs saved, so the figures have little meaning, they said. By raising the ante to 3 million, Obama may have something else in mind: persuading the public that a stimulus costing hundreds of billions of dollars is necessary.

Peter Morici, an economist and business professor at the University of Maryland, said in an interview Saturday that Obama's revised job numbers are an exercise in political marketing.

"He's trying to make the case for a huge stimulus package," Morici said. "Every time you turn around, the numbers get bigger."

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peter.nicholas@latimes.com

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