WASHINGTON – Anxious to jolt the economy back to life, President-elect Barack Obama is considering a federal stimulus package that could reach a whopping $1 trillion, dwarfing last spring’s tax rebates and rivaling drastic government actions to fight the Great Depression.
Obama has not settled on a grand total, but after consulting with outside economists of all political stripes, his advisers appear determined to make the stimulus bigger than the $600 billion they initially envisioned, aides said Wednesday.
Obama is promoting a recovery plan that would feature spending on roads and other infrastructure projects, energy-efficient government buildings, new and renovated schools and environmentally friendly technologies.
There would also be some form of tax relief, according to the Obama team, which is well aware of the political difficulty of pushing such a large package through Congress, even in a time of recession.
While a stimulus of $1 trillion over two years is under discussion, a more likely figure seems to be $850 billion. There is concern that a package that looks too large could worry financial markets, and the incoming economic team also wants to signal fiscal restraint.
Obama advisers, including Christina Romer and Lawrence Summers, have been contacting economists from across the political spectrum in search of advice as they assemble a spending plan that would meet Obama’s goal of preserving or creating 2.5 million jobs over two years.
Among those whose opinions Obama advisers sought were Lawrence B. Lindsey, a top economic adviser to President George W. Bush during his first term, and Harvard professor Martin Feldstein, an informal John McCain adviser and the chairman of the Council of Economic Advisers under President Ronald Reagan.
Feldstein recommended a $400 billion investment in one year, Obama aides said, and Lindsey said the package should be in the range of $800 billion to $1 trillion. The advisers revealed the discussions on condition of anonymity because no decisions had been reached.
“I do recommend $400 billion in year one and expect a similar amount in year two,” Feldstein said in an e-mail message. “The right amount depends on how it is used.”
Lindsey could not be reached.
Obama aides also pointed to recommendations by Mark Zandi, the lead economist at Moody’s Economy.com and an informal McCain adviser who has been proposing a $600 billion plan.
“I would err on the side of making it larger than making it smaller,” Zandi said in an interview. “The size of the plan depends on the forecast — the economic outlook — and that is darkening by the day.”
“Even a trillion is not inconceivable,” he said.
Only one outside economist contacted by Obama aides, Harvard’s Greg Mankiw, who served on President Bush’s Council of Economic Advisers, voiced skepticism about the need for an economic stimulus, transition officials said.
Under scenarios envisioned by Obama’s economic team, a $600 billion package would satisfy the president-elect’s jobs goal by the first quarter of 2011, but would leave an unemployment rate of 8 percent two years from now.
The team believes that to put unemployment on a downward trajectory, with a goal of 7.5 percent or less over two years, would require a stimulus package of about $850 billion. That would generate about 3.2 million jobs by the first quarter of 2011.
The advisers say they agree with economic forecasts that predict that without a government infusion unemployment will rise above 9 percent and not begin to come down until 2011.
Senate Majority Leader Harry Reid, D-Nev., said Wednesday that Obama has indicated that Congress will get his recovery recommendations by the first of the year.
“He’s going to get that to us very quickly and so we would hope within the first 10 days to two weeks that he’s in office, that is after Jan. 20, that we could pass the stimulus plan,” Reid said. “We want to do it very quickly.”
This week, House Speaker Nancy Pelosi said Democrats were preparing their own recovery bill in the range of $600 billion, blending immediate steps to counter the slumping economy with longer-term federal spending that encompasses Obama’s plan.
A stimulus package that approaches $1 trillion could run into significant Republican opposition in Congress. It also could cause heartburn for moderate and conservative Democratic lawmakers, known as Blue Dogs, who oppose large budget deficits.
“Republicans want to work with the president-elect to help get our economy on the path to recovery, but we have grave reservations about taking $1 trillion from struggling taxpayers and spending it on government programs in the name of economic ‘stimulus,'” House Republican leader John Boehner said in a statement.
In February, Congress passed an economic stimulus bill costing $168 billion and featuring $600 tax rebates for most individual taxpayers and tax breaks for businesses. Pelosi largely bowed to President Bush’s insistence to keep the measure free of spending on federal projects.
The upcoming effort would dwarf that earlier measure as well as a $61 billion stimulus bill the House passed just before adjourning for the elections. That measure died after a Bush veto threat and GOP opposition in the Senate.
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