Obama urges spending as Democrats criticise tax cuts
Published: Thursday January 8, 2009

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President-elect Barack Obama Thursday proposed tax cuts and a rapid dash to green energy as part of a massive stimulus package that he said was essential to avert economic disaster.

"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 his first set-piece speech since his election triumph.

"If nothing is done, this recession could linger for years," he said, in an appeal to both Congress and the public 12 days before his inauguration to back a stimulus bill expected to total at least 775 billion dollars.

Some Democratic lawmakers balked at Obama's proposed tax cuts, and downplayed their potential effectiveness at bolstering employment figures or stimulating the economy.

"They were especially critical of a proposed $3,000 tax credit for companies that hire or retrain workers," said AP.

"'If I'm a business person, it's unlikely if you give me a several-thousand-dollar credit that I'm going to hire people if I can't sell the products they're producing,' said Sen. Kent Conrad, D-N.D., a member of the committee.

"'That to me is just misdirected,' Conrad said.

"Sen John Kerry, D-Mass., said, 'I'd rather spend the money on the infrastructure, on direct investment, on energy conversion, on other kinds of things that much more directly, much more rapidly and much more certainly create a real job."

Republican lawmakers as well balked at the costs and question how much of the money will actually stimulate growth to haul the world's largest economy out of its year-old contraction.

But Obama said the economic price of not launching a huge stimulus would be far worse, despite a budget deficit forecast to top one trillion dollars this year.

Without action, Obama warned, "the unemployment rate could reach double digits," an entire generation's potential might be thwarted and the United States could lose its global competitive edge.

"In short, a bad situation could become dramatically worse," he told a packed audience at George Mason University in Washington's Virginia suburbs, an institution that is ironically a bastion of free-market economic theory.

Obama has already vowed a nationwide program of repairs to "crumbling" roads, bridges and schools, a rollout of broadband Internet across rural America and federal aid to cash-strapped US states.

In the speech, he pledged a 1,000-dollar tax cut for 95 percent of working families as the "first stage" of a program of tax relief that would extend into the government's next budget.

Production of alternative energy would be doubled in the next three years, Obama said, and more than 75 percent of federal buildings and two million homes would be modernized to slash billions from power bills.

The president-elect promised a new "smart" electricity grid to cut blackouts and deliver new forms of energy to homes and businesses.

And he said all patients' medical records would be computerized within five years, saving lives and billions of dollars.

"I understand that some might be skeptical of this plan," Obama said.

But what he calls the American Recovery and Reinvestment Plan "won't just throw money at our problems -- we'll invest in what works."

Despite expanded Democratic control of both the Senate and House of Representatives, Obama wants convincing majorities of lawmakers to sign on, and that means mollifying Republican critics.

Republican leaders welcomed Obama's proposal for tax cuts, which he says will total 40 percent of a final package that some economists say could reach up to 1.2 trillion dollars.

But House Republican leader John Boehner said "it is very important as we go ahead that we find the right balance.

"Yes our economy needs help, but at the end of the day how much debt are we going to pile on future generations?" he told reporters. "We cannot buy prosperity with more and more government spending."

Some Democrats also criticized a planned 3,000-dollar tax break for companies that hire new workers and a family tax cut as being insufficient.

The corporate tax break was "unlikely to be effective," said Kent Conrad, chairman of the Senate budget committee.

"Business people are not going to hire people to produce products that are not selling," he told reporters.

Lawmakers from both parties expressed profound alarm after the Congressional Budget Office Wednesday forecast the US deficit will reach a jaw-dropping 1.2 trillion dollars in this fiscal year.

"President Obama is walking into a fiscal disaster of stunning proportion, coupled with an economic downturn of unknown duration and depth," Conrad said.

In his speech, Obama acknowledged the costs of his stimulus plan would drive the deficit still higher.

"But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes, and confidence in our economy," he said.

With wire reports