President-elect Barack Obama, faced with a deteriorating economy, is expanding his stimulus package with a goal of creating or saving 3 million jobs over two years, a transition aide said last night.
The revised target, up from 2.5 million jobs he previously announced, came at the suggestion of Christina Romer, Obama's pick to head the Council of Economic Advisers, during a December 16 meeting with the president-elect's top economic advisers, the aide said, speaking on condition of anonymity. Romer said the short, medium and long-term economic forecasts have worsened since Obama outlined the plan on November 22, the aide said.
Romer said the economy is likely to lose 3 million to 4 million jobs over the next year and the unemployment rate is likely to rise to above 9 per cent. As a result, she said, the initial jobs estimate for the package was too timid, according to the aide.
Obama has made his first priority after he takes office January 20 to sign an economic recovery package with a significant focus on infrastructure projects to help boost jobs. Recent economic indicators have underscored the need for additional action, Romer said.
The meeting also included Vice President-elect Joe Biden; Obama's designee for Treasury secretary, Timothy Geithner; director of the White House National Economic Council, Lawrence Summers; and Paul Volcker, Obama's choice to head a new Economic Recovery Advisory Board.
The same day the meeting was held, the Federal Reserve lowered the interest rate for overnight loans between banks to between zero and 0.25 per cent from 1 per cent. The Labor Department reported on December 5 that employers eliminated jobs at the fastest pace in 34 years in November and the unemployment rate rose to 6.7 per cent.
“We are running out of the traditional ammunition that's used in a recession,” Obama said last week just before the Fed's announcement.
As unemployment has increased, estimates of what is needed to pull the nation out of the slump have continued to grow, with some economists calling for a $1 trillion spending programme.
Obama representatives met this week with congressional staffers to discuss a plan estimated between $675 million to $775 billion, the aide said, though earlier this week another aide said Obama may ask Congress to approve as much as $850 billion. Obama hasn't specified a figure.
Obama's team on December 16 discussed elements that could be included in the recovery plan to provide an immediate jobs boost while laying a foundation for long-term economic health, according to the aide.
Examples of such projects included funding already approved infrastructure repair projects; weatherizing homes to save $1 billion in energy costs; modernising health information technology by converting to paperless systems; and advancing technology in schools and provide teachers with better training.
Obama during the meeting told his advisers that spending proposals can't include lawmakers' pet spending projects; that funds should be directed toward already approved projects so jobs can be created quickly; and that government should help facilitate private ventures by removing bureaucratic red tape.
Obama also said he wants to enact measures designed to protect workers and families from future recessions.
Obama and his family arrived yesterday for a two-week holiday in Hawaii. Obama's advisers will use the guidelines with the intent of having a draft of the plan ready when he returns.
