President-elect Barack Obama said Thursday that the nation’s recession could "linger for years" unless Congress acts to pump unprecedented sums from Washington into the U.S. economy, making his highest-profile case yet on an issue certain to define his early presidency.
"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," Obama said in a speech set to be delivered at George Mason University in Fairfax, Va., outside Washington. Excerpts from his prepared text were released in advance by his transition team.
"A bad situation could become dramatically worse," he added, painting a dire picture — including double-digit unemployment and $1 trillion in lost economic activity — that recalled the days of the Great Depression in the 1930s.
It was the fourth day in a row that Obama has made a pitch for a huge infusion of taxpayer dollars to revive the sinking economy.
His events have increasingly taken on the trappings and air of the presidency, with the speech — coming a full 12 days before he takes over at the White House — a particularly showy move. Presidents-elect typically stick to naming administration appointments and otherwise staying in the background during the transition period between Election Day and Inauguration Day, but Obama has clearly made the calculation that a nation anxious about its economic outlook and eager to bid farewell to the current president, George W. Bush, needs to hear from him differently and more frequently.
Indeed, the economic news is grim.
Consumers and companies are folding under the negative forces of a collapsed housing market, a global credit crunch and the worst financial crisis since the 1930s. The recession, which started in December 2007, already is the longest in a quarter-century.
A report due out the same day as Obama’s speech is expected to show that the number of newly laid-off people signing up for state unemployment insurance last week rose to 540,000, up from 492,000 in the previous week. The number of people continuing to draw jobless benefits is projected to stay near 4.5 million, demonstrating the troubles the unemployed are having in finding new jobs.
For all of 2008, employers probably slashed payrolls by at least 2.4 million. That’s based on economists’ forecasts for a net loss of 500,000 additional jobs in December, as well as the job losses previously reported. Some, however, think the number of jobs cut last month will be higher, around 600,000 or 700,000. The Labor Department will release that report Friday.
"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," Obama said. "More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."
A day after the release of a stunning new estimate — that the federal budget deficit will reach an unprecedented $1.2 trillion this year, nearly three times last year’s record — Obama acknowledged the new stimulus spending will "certainly add to the budget deficit." He also acknowledged some sympathy with those who "might be skeptical of this plan" because so much federal money has already been spent or committed in an attempt — largely unsuccessful so far — to get credit, the lifeblood of the American economy, flowing freely once again.
Such statements are coded to appeal to budget hawks in both parties, whom Obama wants to win over so that approval of a package draws wide, bipartisan support in the Democratic-led Congress.
To answer their concerns, he promised to allow funding only for what works. He also pledged a new level of transparency about where the money is going. A day earlier, he promised to tackle the out-of-control fiscal problem posed by Social Security and Medicare entitlement programs and named a special watchdog to clamp down on all federal programs.
Obama made broader arguments, too, saying that the private sector, typically the answer, cannot do what is needed now.
"At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe," he said.
Obama’s transition team and Democratic congressional leaders are working daily to hammer out the still-evolving package, expected to total nearly $800 billion. The initial hope had been to have a new stimulus package approved by Congress in time for Obama to sign it upon taking office on Jan. 20. That timeline has slipped considerably, into at least mid-February if not later.
The package is expected to include tax cuts for businesses and middle-class workers, money to help cash-starved states with Medicaid programs and other operating costs, and a huge share for infrastructure building, investments in energy efficiency and a rebuilding of the information technology system for health care. Much of the latter portions of the plan are aimed at what Obama likes to talk about as the need for "reinvestment" and not just "recovery."
"It is not just another public works program," he said in the speech. "It’s a plan that recognizes both the paradox and the promise of this moment, the fact that there are millions of Americans trying to find work even as, all around the country, there is so much work to be done."
He also promised action to address the economy’s ills beyond the package, such as tackling the massive wave of home foreclosures many experts expect, preventing the failure of financial institutions, rewriting financial regulations and keeping accountable the "Wall Street wrongdoers" who engage in risky investing.