Obama plans biggest fiscal boost for US
New York, December 22:
Barack Obama’s administration in waiting signalled yesterday it was preparing the biggest economic stimulus in US history to avert mass unemployment in a stuttering economy that could face the toughest recession in half a century.
In a programme tinged with environment friendly initiatives, the US president-elect has set a new target of creating or safeguarding 3 million jobs, by unleashing an avalanche of government spending and offering widespread tax rebates.
The Obama camp indicated that the package would be worth between $675 and $775 billion, easily eclipsing other packages unveiled in China, Japan and Britain. The cash will include programmes to transmit wind and solar energy across America and to put millions of medical records into digital format.
Obama’s vice-president elect, Joe Biden, said the stimulus was the “single most important thing” facing the new administration and warned that action was needed to prevent the economy from “absolutely tanking”.
Some 1.9 million US jobs have been lost this year and Obama’s aides have briefed him that as many as 4 million could be at risk, which would take the unemployment rate to nine per cent.
Quoting transition officials, the New York Times said Obama’s team feared that the downturn could eclipse anything in the last 50 years.
At a brainstorming session held in the basement of the Capitol building last Friday, Obama’s economic team grappled with ways to address the subprime mortgage crisis, the credit crunch and a slump in consumer spending that has left shopping centres strikingly quiet this Christmas.
Among the proposals is the creation of a smart power grid to broaden the transmission of wind and solar power. A limitation of green power generation is that wind farms and large-scale solar panels are easier to site in remote areas, leaving a challenge in taking energy to centres of population.
Biden said such a project would create tens of thousands of jobs and would have long-term benefits. He said “every major economist”, from left to right on the political spectrum, agreed that “direct government spending now is the best way to infuse economic growth”.
Other specific commitments include putting all US medical records online - which would involve a substantial investment but would create long-term savings estimated at $78 billion annually.
Economists agree that the immediate outlook is dismal. The US economy is expected to shrink
by at least 4 per cent in the final quarter of the year and figures out this week are likely to show a 0.7 per cent drop in monthly high street spending, according to a survey by Bloomberg.
Although it will include some $150 billion in tax relief for people on low and middle incomes, the Obama administration’s emphasis on spending marks a shift from the approach of George Bush, who tried to stimulate the economy over the summer simply by sending out millions of tax rebate cheques.