Obama: $300 billion in tax cuts
President-elect begins push on Hill for rescue proposal. On tap: Breaks for workers and businesses, energy and road and school construction.
NEW YORK (CNNMoney.com) -- President-elect Barack Obama launched his campaign Monday for a massive package of tax cuts and spending proposals aimed at reviving an economy mired in recession.
Obama met with congressional leaders from both parties. He is also planning to deliver a major speech on the economy on Thursday, a senior Democratic official told CNN.
"The reason I'm here today is that we are going to present our latest ideas to Congress," Obama said. "We expect them to begin this week on this process."
The president-elect will propose roughly $300 billion in tax cuts for individuals and businesses. He has not publicly put a price tag on his overall stimulus plan, though his advisers have said they expect it to fall between $675 billion and $775 billion, 40% of which would be in tax cuts.
According to an Obama spokesman, several tax breaks are under serious consideration.
Middle-class tax cut: Obama would offer a tax cut equal to $500 a year for individuals and $1,000 for couples. The credit would work essentially as a payroll tax credit, meaning the money could be delivered fairly quickly. Companies could simply reduce the tax they withhold from employees' paychecks.
The tax credit is likely to be offered only to those below a certain income level, but the Obama team hasn't specified where the cut-off point would be. The credit also would be refundable, meaning that even tax filers without any tax liability -- typically very low-income workers -- would receive one.
The credit is similar to one Obama proposed during the campaign.
"What's required for the economy right now [is] to put more money into the pockets of ordinary Americans who are more insecure about their jobs, who are continuing to see rising costs in an area like health care, who are struggling to make ends meet," he said Monday.
Business break for losses: Obama is considering a tax break for businesses that book losses in 2008 and 2009.
The stimulus plan may extend what's called the net-operating loss carryback to five years, up from two years currently. The provision lets companies apply their losses to past and future tax bills so that they can get money back on taxes they've already paid or would otherwise have to pay.
Job creation: Obama would establish a new credit for businesses that either create jobs in the United States or avoid layoffs.
Small business write-off: Obama would increase the amount of expenses small businesses can write off to $250,000 in 2009 and 2010, up from $125,000 currently.
While political observers believe the now-added emphasis on business tax cuts as a major part of a stimulus package is one way the Obama team hopes to attract Republican support, that's not how the Obama camp sees it.
"We're working with Congress to develop a tax-cut package based on a simple principle - what will have the biggest and most immediate impact on creating private sector jobs and strengthening the middle class. We're guided by what works, not by any ideology or special interests," an Obama spokesperson told CNNMoney.com in an e-mail.
Obama on Monday said it's "very important to have a balanced recovery and reinvestment package."
In his weekly radio and video address on Saturday, Obama offered a broad stroke sketch his proposal, which he called the American Recovery and Reinvestment Plan. In addition to a tax cut for workers, he said he would propose to:
- double renewable energy production and make public buildings more energy efficient;
- rebuild crumbling roads, bridges and schools;
- computerize the health care system;
- and modernize classrooms, labs and libraries.
"Economists from across the political spectrum agree that if we don't act swiftly and boldly, we could see a much deeper economic downturn," Obama said. "That's why we need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term."
The main goal of his plan: to create 3 million new jobs. Most would come from the private sector, he said.
As Obama prepares to take office on Jan. 20, the country faces a series of severe economic and political challenges.
Nearly 2 million jobs were lost in the first 11 months of 2008 - the final government reading on the employment picture will be released on Friday - and the economy has stagnated. Investors suffered the worst year in stocks since the Great Depression, and foreclosures are rising while housing values are declining at record paces.
Virtually every state is facing a budget shortfall, forcing many to make plans to cut back on critical services and raise taxes.
To that end, Obama's advisers and lawmakers have said they expect his legislation to provide increased aid to states to pay for Medicaid, as well as a boost to unemployment benefits.
Many economists have called for stimulus spending to approach or even exceed $1 trillion if the government expects to successfully beat back one of the deepest downturns in more than two generations.
Some Democrats and Republicans have already raised red flags about the scope of Obama's proposals and the prospect of a rushed attempt to pass the legislation, which would be the most expensive spending bill in U.S. history.
The congressional timeline for the stimulus plan is not clear, nor has Obama provided an official blueprint to Congress.
"The urgency of this, everyone knows about," said Senate Majority Leader Harry Reid, D-Nev., said on NBC's "Meet the Press" on Sunday. "But I'm not going to have some false deadline [on it], whether it's February 1 or whatever it is. I want to make sure that all senators have some input in what goes on here and that we do it as quickly as we can."
A sharp debate is likely over several crucial questions. Will the proposed measures in fact boost the economy? What's the right balance between seeding short-term stimulus versus funding long-term projects? Will money intended to yield long-term dividends for the economy as a whole end up merely serving politically motivated agendas or pet projects?
Obama attempted to assuage some of those concerns on Saturday when he called for "vigorous oversight and strict accountability for achieving results." He stressed that his plan is not an attempt to "throw money" at the economy's problems.
"I am optimistic that if we come together to seek solutions that advance not the interests of any party, or the agenda of any one group, but the aspirations of all Americans, then we will meet the challenges of our time just as previous generations have met the challenges of theirs," Obama said.
- Additional reporting by CNN correspondent Kate Bolduan.
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