President-elect Barack Obama said the U.S. recession will worsen before a recovery takes hold and that he will offer an economic stimulus plan “equal to the task” without worrying about a short-term widening of the budget deficit.
Dealing with the loss of jobs, frozen credit markets, falling home prices and other signs of economic turmoil is “my number one priority,” Obama said on NBC today. Later at a Chicago news conference he said “more aggressive steps” are needed to cope with the housing crisis. Even with the prospect of a federal budget shortfall approaching $1 trillion, “we can’t worry, short term, about the deficit,” he said on NBC’s “Meet the Press” program. “We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving.” The economy has shown signs of worsening since the Nov. 4 election. The Labor Department reported Dec. 5 that employers cut 533,000 workers last month, bringing losses this year to 1.91 million. U.S. stocks fell for the fourth time in five weeks as the worsening job market added to concern the recession is deepening. “Things are going to get worse before they get better,” Obama, 47, who takes office on Jan. 20, said on NBC. In Chicago, Obama said the recession is still “rippling” through the economy. Housing Crisis Obama also said in Chicago that his economic team is working on plans to address the housing crisis, noting that he hasn’t seen the “kind of aggressive steps in the housing market to stem foreclosures” that he wants to see from President George W. Bush. Obama’s transition team has spoken with the outgoing administration about the situation, he said. “If it is not done during the transition, it will be done by me,” Obama said. The U.S. will come out of the downturn more competitive in the global marketplace if “bold” steps are taken now, Obama said. “We will emerge stronger than we are right now,” Obama said at the Chicago news conference, called to announce that former Army Chief of Staff Eric Shinseki is his choice to head the U.S. Department of Veterans Affairs. Construction Spending While Obama didn’t offer any new details of his recovery plan in either the NBC interview or his news conference, he reiterated a commitment he made in his weekly radio address yesterday to the biggest investments in the nation’s infrastructure since the President Dwight D. Eisenhower created the interstate highway system a half-century ago. Obama said state governors have many such projects that are “shovel ready,” meaning they could be undertaken swiftly and have an immediate impact on jobs. He also indicated that proposals — which could include updating health care administration and public schools — would be reviewed as part of his broader plan. “The days of just pork coming out of Congress as a strategy, those days are over,” he said in the NBC interview, which was taped yesterday. He declined to specify a price tag for the stimulus, saying his advisers are “busy working, crunching the numbers, looking at the macroeconomic data to make a determination as to what the size and the scope of the economic recovery plan needs to be. But it is going to be substantial.” Potential Cost Lawmakers in Congress suggested last month that the size of such a program may be between $500 billion and $700 billion. Jared Bernstein, named as economic policy director for Vice President-elect Joe Biden, said after the job numbers were released Dec. 5 that “it’s fair to assume the upper bound on a stimulus package is going up, not down.” Obama sidestepped questions about whether he would delay making good on his campaign promise to repeal Bush administration tax cuts for those making $250,000 or more annually. He said his economic team is studying whether to raise those rates right away or wait until the tax cuts to expire on schedule in 2011. During the hour-long NBC interview, Obama also said that while it’s not an option to let U.S. automakers “collapse” amid a recession and throw more workers out of jobs, any government loans or aid they get must be conditioned on the companies revamping their business and their products. Auto Industry Aid That also may mean management changes at General Motors Corp., Ford Motor Co. or Chrysler LLC, he said. The executives must abandon their “head-in-the-sand” approach and develop a “sustainable business model” that begins by building fuel efficient vehicles. “They can’t keep on putting off the changes that they frankly should have made 20 or 30 years ago,” Obama said. He called for “a new ethic of responsibility” for corporate leaders when it comes to executive compensation, saying they should be willing to give up some pay and bonuses to allow more workers to keep their jobs, retain medical insurance and stay in their homes. “That kind of notion of shared benefits and burdens is something that I think has been lost for too long and is something that I’d like to see restored,” he said. The circumstances aren’t unique to the auto industry, he added. “We have seen that across the board. Certainly we saw it on Wall Street.” Source: Bloomberg