Obama says worse still to come

2008-11-25 08:22

Washington - President-elect Barack Obama named his economic brain-trust on Monday, acknowledging millions more American workers could lose their jobs next year and playing down expectations his administration could engineer a quick turnaround of the financial crisis.

Hoping to hit the ground running when he takes office on January 20, the next president urged the new Congress to pass quickly what was expected to be a massive economic stimulus package, pledged help for the troubled US auto industry and blessed the Bush administration's moves to bail out the financial industry.

At the same time, Obama said he planned a second news conference in as many days on Tuesday to discuss the need "to scour our federal budget, line-by-line, and make meaningful cuts and sacrifices as well".

Obama named New York Federal Reserve President Tim Geithner the next treasury secretary at a Monday press conference, where he said the United States faces a "crisis of historic proportions" and played down expectations his administration could put the brakes on quickly.

"This will not be easy. There are no shortcuts or quick fixes to this crisis, which has been many years in the making, and the economy is likely to get worse before it gets better," he said. "Full recovery will not happen immediately."

"Most experts now believe that we could lose millions of jobs next year," he said.

'We've done it before'

Obama ordered his team over the weekend to work on a programme to create or save 2.5 million jobs by the end of 2010. He would not put a figure on how large a stimulus package he wants from Congress, saying only that it would be "costly", but Democratic lawmakers speculated the price tag could reach $700bn over two years.

At his Monday news conference, Obama was critical of the country's top three automakers, saying he was surprised they did not have a precise plan for their future before asking Congress last week to approve $25bn in emergency loans. But, he said, once he sees a plan, he expected "to be able to shape a rescue".

Obama also named Lawrence Summers as director of his National Economic Council. Summers was treasury secretary under former President Bill Clinton and is a former president of Harvard University.

Obama said the economic and financial crisis confronting the United States and the world demanded the "sound judgment and fresh thinking" his new team would bring to bear on problems as great as any since the Great Depression in the 1930s.

The president-elect expressed confidence the nation would pull out of the economic morass "because we've done it before".

Kicking off the Thanksgiving holiday week in the United States, Obama also announced two other members of his new economic team. He named Christina Romer as chairperson of his Council of Economic Advisers, and Melody Barnes as director of his White House Domestic Policy Council.

New plan will be significantly larger

Geithner is an Asian affairs veteran who has studied Japanese and Chinese and has lived throughout the region. He earned an Asian studies degree from Dartmouth College and international economics and East Asian studies degrees from the Johns Hopkins School of Advanced International Studies, according to the Federal Reserve website.

The scope of the recovery package he plans would be far more ambitious than Obama had spelled out during his presidential campaign, when he proposed $175bn to be used for in spending and tax-cutting stimulus.

The new plan will be significantly larger and incorporate his campaign ideas for new jobs in environmentally friendly technologies. It also would include his proposals for tax relief for middle- and lower-income workers.

Significantly, the plan would not offer an immediate tax increase on wealthy taxpayers. During the campaign, Obama said he would raise taxes of people making more than $250 000. On Monday he signalled his intention to go forward with the tax hike on wealthier earners but was less clear about when that might occur, suggesting it might wait until cuts implemented by President George W Bush expire in 2011.

In the country's latest financial bailout, the US government said late on Sunday it had agreed to shoulder hundreds of billions of dollars in possible losses at the banking giant Citigroup and to put a fresh $20bn into the stricken company.

Bush said he consulted with Obama on the Citigroup rescue, noting "close co-operation" between his administration and the incoming Obama camp.

- AP