WASHINGTON — President-elect Barack Obama painted a bleak economic outlook as he took his case for an economic recovery package to the American public on Thursday in his first major policy speech since the election.
This story first appeared in the January 9, 2009 issue of WWD. Subscribe Today.
“We start 2009 in the midst of a crisis unlike any we have seen in our lifetime — a crisis that has only deepened over the last few weeks,” Obama said in the speech at George Mason University, Fairfax, Va. “Nearly two million jobs have now been lost, and on Friday we are likely to learn [in a government report] that we lost more jobs last year than at any time since World War II.”
The president-elect said if “dramatic action” is not taken immediately, “this recession could linger for years.”
“The unemployment rate could reach double digits,” Obama said. “Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. In short, a bad situation could become dramatically worse.”
Amid mounting bankruptcies and liquidations, Obama has spent this week on Capitol Hill conferring with lawmakers about an economic stimulus plan he estimates could cost $775 billion to create or save 3 million jobs, put more money into consumers’ pockets through tax cuts, and reinvigorate business investment and job retention with a package of tax incentives.
As he prepares to officially take the reins on Jan. 20, Obama faces significant challenges domestically and internationally. In addition to a recession at home, a two-front war in Iraq and Afghanistan continues to drive up the deficit, which is now projected by the Congressional Budget Office to hit $1.2 trillion this year.
The rising deficit has spawned concern among fiscally conservative Democrats and Republican lawmakers about the cost of Obama’s stimulus package that could increase as Congress puts its own stamp on it. But most economists agree the country needs a massive plan to jump-start the economy, create jobs, spark investment and thaw frozen credit markets.
Obama’s proposed plan would provide $300 billion in tax cuts for workers and businesses; implement a huge jobs program to repair the nation’s aging infrastructure; bolster states’ budgets, and provide incentives for alternative energy usage and production. The plan provides the last piece needed to stem the effects of the deepening recession, said Richard Yamarone, chief economist, Argus Research Corp. Improved energy prices and monetary policy have gone as far as they can without the added boost of federal government action.
“Unless we get that other piston firing, which is fiscal policy, the U.S. economy is not going to be moving,” Yamarone said. “You’re going to continue to see job layoff after job layoff. We need the government to step up.”
Consensus expectations for today’s unemployment report are that more than 400,000 jobs were lost last month and some estimates predict closer to 600,000 jobs could have evaporated. In November, 533,000 jobs vanished, the worst monthly drop in 34 years and the 11th consecutive monthly decline.