Obama Team Assembling $850 Billion Stimulus
By Lori Montgomery
Washington Post Staff Writer
Friday, December 19, 2008; A01
Barack Obama and congressional Democrats have entered
discussions over an economic stimulus package that could grow to
include $850 billion in new spending and tax cuts over the next two
years, a gigantic sum that some Democrats say could prove difficult
to push rapidly through Congress.
A package of that size -- which would include at least $100
billion for cash-strapped state governments and more than $350
billion for investments in infrastructure, alternative energy and
other priorities -- is a significant increase over the numbers
previously contemplated by Democrats. It would exceed the $700
billion bailout of the U.S. financial system, as well as the annual
The potential for massive new spending has touched off a frenzy
among interest groups eager to claim their share of the expanding
stimulus pie. The profusion of requests from governors,
transportation groups, environmental activists and business
organizations is spawning fears that the package could be loaded
with provisions that satisfy important Democratic constituencies but
fail to provide the jolt needed to pull the nation out of a
"It's everybody's wish list, everybody's favorite program. And I
think that's a big mistake," said Alice Rivlin, a
Brookings Institute economist and former budget director for
Bill Clinton who has been advising Democrats. "I agree with the
Obama team that we need a big increase in public investment, but it
should be done very, very wisely," rather than through a rushed
process that risks being "seen as scattering money to the wind."
An Obama adviser involved in crafting the stimulus package said
the transition team was keenly aware of the potential pitfalls and
was focused on funding ideas that would quickly pump money into the
sagging economy, fulfilling Obama's promise to create or preserve
2.5 million jobs by 2011. Because many ideas probably won't meet
that standard, the adviser said, the team is developing a screen to
keep them out.
Yesterday, Obama economic adviser
Jason Furman and congressional liaison Phil Schiliro met on
Capitol Hill with key congressional staff to lay out the plan
Obama expects to present to lawmakers. According to notes taken by a
participant and shared by a senior congressional aide on the
condition of anonymity, the pair said Obama is putting together a
package of $670 billion to $770 billion but that he expects
additions by Congress to jack up the total to about $850 billion, or
6 percent of the nation's economy.
While that figure is larger than any previously discussed by
Democratic leaders, it is within the range of recommendations from
economists. Some, such as Nobel Prize-winning economist
Joseph Stiglitz, have called on the government to spend as much
as $1 trillion to combat rising unemployment and spur economic
Furman and Schiliro said the package would include $100 billion
to help states cover the expanding cost of
Medicaid, the federal health program for the poor. With more
than half of states reporting budget shortfalls this year, the
package also could include big increases in state block grants and
other programs intended to help local governments avoid layoffs or
At least $350 billion would be devoted to investments, including
public works projects such as roads and bridges. That category also
would cover funding for alternative energy, health-care technology,
school modernization and "protecting the most vulnerable" by
expanding unemployment insurance and food-stamp benefits, according
to a memo sent to Senate Democrats yesterday by
Senate Majority Leader Harry M. Reid's (D-Nev.) chief of staff,
as well as other congressional aides.
Obama also expects to include significant new tax cuts for the
middle class, probably modeled on his campaign promise to lower the
tax burden on workers, students, the elderly and families. The
package could also include his proposal to offer tax credits to
companies that create jobs, according to sources.
Congressional aides said Obama is soliciting additional ideas
from lawmakers with the aim of building support for a package that
he hopes will be ready for him to sign soon after he takes office
Jan. 20. In yesterday's meeting, however, Furman and Schiliro
acknowledged that Jan. 30 may be a more realistic goal.
But even that date may be optimistic for a package of the
magnitude under discussion.
Sen. Daniel K. Inouye (D-Hawaii), the incoming chairman of the
Senate Appropriations Committee, said yesterday that there was no
agreement on the size of the package, adding that he is skeptical of
reports that it could approach $1 trillion.
"We're a country that's used to saying 'a million' or 'billion'.
'Trillion' is something that's very seldomly used," Inouye said.
The $850 billion figure is also meeting resistance from House
Democrats, who say anything beyond the $600 billion
House Speaker Nancy Pelosi (D-Calif.) has mentioned would
probably lose votes among fiscally conservative Democrats known as
Concerns about the political viability of the package are
compounded by fears that its economic effectiveness could be
diluted. Rivlin said she would prefer quick approval of a much
smaller package that contains only items that would rapidly push
cash into the economy, such as aid to states and the poor and
perhaps a payroll tax holiday. That could be followed, she said, by
a larger spending package with investments thoughtfully crafted to
achieve Obama's broader economic goals.
"Mass transit, the high-tech stuff, investment in health IT.
Those are all good ideas. But they aren't stimulus," Rivlin said.
Simon Johnson, an economist at the
Massachusetts Institute of Technology, said he shares Rivlin's
concern that such a huge pot of money would probably be misspent.
"My personal opinion is you can spend $450 billion quite
sensibly," Simon said. "But if you start raising it up, you have to
ask whether you're getting good value for the money."
Acknowledging the tough task ahead, a coalition of 20 liberal
organizations and unions -- including the
Sierra Club, AFSCME, the
ACORN -- yesterday launched a $5 million grass-roots and public
relations campaign to support the evolving package and avert a
filibuster in the Senate.
"Our goal is to help move it along as fast as humanly possible so
Obama doesn't have to waste a lot of his capital on it as
president," said Brad Woodhouse, president of Americans United for
Change, which is coordinating the effort. "There are going to be big
fights ahead on health care and completely trying to revamp our
approach to energy. If you have to do a lot of horse-trading on this
thing, it makes what comes afterward a lot more difficult."
Staff writer Paul Kane and polling director Jon Cohen
contributed to this report.