Obama Begins Selling Americans the Stimulus Plan

As hard negotiations get under way, the President-elect is starting the tough job of rallying public support for the ambitious $775 billion plan

By Jane Sasseen

President-elect Barack Obama rocketed to national prominence and won the battle for the nation's highest office in large part thanks to his extraordinary communication skills. Now, just 12 days before he takes office, he's turning to those skills to convince Americans that his ambitious $775 billion stimulus plan will go a long way to helping pull the U.S. economy out of its deep funk.

In his first major speech since being elected, in which he echoed John F. Kennedy, FDR, and even the poet Langston Hughes, Obama warned that quick and "dramatic" moves are needed. Otherwise, "a bad situation could become dramatically worse." He urged bipartisan action, without add-on provisions that would delay the package, saying: "The true test of the policies we'll pursue won't be whether they're Democratic or Republican ideas, whether they're conservative or liberal ideas, but whether they create jobs, grow our economy, and put the American Dream within reach of the American people."

Emerging Criticism

Elements of the plan highlighted by Obama include: a $1,000 income-tax cut, which he said would reach 95% of American families; spending on alternative energy initiatives; investing in infrastructure improvements including the electric grid and broadband lines; modernizing classrooms; and computerizing health records. "The overwhelming majority of the jobs created will be in the private sector," he said, "while our plan will save the public-sector jobs of teachers, police officers, firefighters and others who provide vital services."

The televised speech, at George Mason University in Fairfax, Va., was short on exact dollar figures for Obama's proposals and comes after the President-elect spent several days hashing out the initial details of the plan in closed-door meetings with congressional leaders and his economic advisers. But as the hard negotiations get under way—and critics of the various parts of the plan he has proposed start to emerge—Obama is beginning the tough job of rallying public support for the expensive plan.

Already, many—and not just deficit hawks—have begun to worry about the extraordinary size of the plan. Obama's team has proposed some $775 billion in stimulus, with perhaps $300 billion to go to tax cuts for businesses and individuals. But with every business and consumer lobbying group in Washington throwing up its own preferred proposals—and with many in Congress angling to get long-favored ideas included as well—the size could quickly grow. Estimates that the total package could hit anywhere from $1 trillion to $1.3 trillion by the time all is said and done are floating around Washington.

Too Much, Too Fast

That prospect is starting to bring out criticism that too much money is going to be thrown too quickly at ineffective projects and programs, running up the deficit for little long-term benefit. "It's incredibly difficult to identify things that are valuable in the long run, can be financed in the short run, and get the money out the door quickly," former Congressional Budget Office Director Douglas Holtz-Eakin, an adviser to Senator John McCain (R-Ariz.) in the Presidential campaign, told the Associated Press. "It would be preferable to take any stimulus you feel is necessary and target it on a few things—don't spread it as seed money for a thousand programs that'll never stop growing."

That worry was heightened by the fact that details over the package came out just days before the Congressional Budget Office issued its forecast that the 2009 budget deficit will soar to an astounding $1.2 trillion—some 8.3% of GDP, a postwar record. And at that, points out Thomas Gallagher, the head of policy research for institutional broker ISI Group, the deficit projection is highly optimistic. The stimulus bill alone, including interest costs, is likely to add another $1 trillion to the deficit over the next decade, he says.