MercoPress. South Atlantic News Agency

Obama urges “drastic action” from Congress on stimulus plan

US President-elect Barack Obama has called for “drastic action” to prevent the US economic situation worsening. In his first major policy speech since being elected, Mr Obama urged Congress to act quickly to pass his 800 billion US dollars stimulus plan.

"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," he said. "If nothing is done, this recession could linger for years; this is a crisis unlike any we have seen in our lifetime," he said in a speech in Virginia. "A world that depends on the strength of our economy is now watching and waiting for America to lead once more, and that is what we will do." Mr Obama said that, with US interest rates near zero, and economic activity and lending still shrinking, it was up to the government to act. "Only the government can provide the short-term boost necessary to lift us from a recession this deep and severe," he said. "I urge Congress to move as quickly as possible on behalf of the American people." Mr Obama, who takes office on 20 January, has spent his first week in Washington focusing on his plan to revive the struggling US economy, which is entering its worst recession since the 1930s. His stark warning comes as US job losses for 2008 are expected to reach 2.5 million when the December figure is released on Friday. Mr Obama said his plan would create three million jobs by 2011. But in a bid to gain bipartisan support for his plan, he is also including substantial tax cuts for both individuals and businesses, as well as a large program on infrastructure spending on such items as roads and schools. His task has been made more difficult by the projections by the Congressional Budget Office, released on Wednesday, that the budget deficit will reach 1.2 trillion US dollars this year - before any extra stimulus plan. Even the Democratic chair of the House Budget Committee, John Spratt, said that he had been shocked when he saw the figure. The size of the package means that his hopes of Congress passing the plan by the time he takes office have faded, with mid-February now seen as the earliest date that Congress could take action. Mr Obama acknowledged that there was substantial scepticism among the US public about government intervention in the economy. "I understand that some might be sceptical of this plan. Our government has already spent a good deal of money, but we haven't yet seen that translate into more jobs or higher incomes or renewed confidence in our economy," Mr Obama said. He said that any decisions on spending would be made transparently and informed by "independent experts", while he would launch an "unprecedented effort" to "eliminate unwise and unnecessary spending". Mr Obama said that the crisis was caused by reckless and irresponsible action by banks, corporations, and the government. He added that there had to be a "sweeping effort" to address the foreclosure crisis and keep the financial systems functioning. He pledged to reform "a weak and outdated" regulatory system to protect consumers and investors from the "reckless greed and risk-taking" that should "never endanger our prosperity again". "No longer can we allow Wall Street wrongdoers to slip through the regulatory cracks. No longer can we allow special interests to put their thumbs on the economic scales," he said. He also vowed to do more to help families who had been directly hit by the downturn, including those who are facing foreclosure. In a concrete sign that Wall Street is now prepared to help such families, it emerged that some leading bankers have withdrawn their opposition to allowing bankruptcy judges to modify the terms of mortgages in arrears in order to prevent foreclosures. According to a report in the Wall Street Journal newspaper, the huge US bank Citigroup is now negotiating with key Congressional committees on a deal which would give judges unprecedented powers, something long opposed by the financial services industry. Around 40% of Mr Obama's stimulus package will consist of tax breaks, including rebates for people earning less than 200,000 USD a year, as well as tax credits for companies taking on additional staff. Besides 500 USD tax cuts for most workers and 1,000 USD for couples, the proposals could include tax breaks of more than 100 billion for businesses. The plan is likely to allow firms incurring losses last year to take a credit against profits dating back five years, instead of the two years currently allowed. Another provision would award a one-year tax credit costing 40 to 50 billion to companies that hire new workers, and would provide other incentives for business investment in new equipment. Mr Obama's economic recovery plan depends on swiftly pumping hundreds of billions of federal dollars into the economy to create jobs. The focus is on tax cuts and government spending that can provide an immediate lift to the economy. However, the proposals also appear to contain money that might not actually be spent for several years, such as plans to rebuild the electric power grid and buy billions of dollars of computers and software for the health care sector.