PEBO: Stimulus Package Won’t Be As Big As Some Economists Want Because of Concerns About Deficits

Jan 7, 2009 12:19pm

"Today the Congressional Budget Office announced that the deficit we are inheriting for this budget year will be $1.2 trillion," President-elect Obama said today, noting that the stimulus package "will necessarily add more."

Even after our economy "pulls out of its slide," the President-elect warned, "trillion dollar deficits will be a reality for years to come. But as I said yesterday, our problem is not just a deficit of dollars. It’s a deficit of accountability… a deficit of trust. So change and reform can’t just be election-year slogans. They must become fundamental principles of government."

With that the President-elect introduced his choice to head a new position in the White House, the Chief Performance Officer. Former Treasury Department official Nancy Killefer, currently Senior Director in McKinsey & Company’s Washington, D.C. office, will work with Obama’s Cabinet and others "to discuss how they can run their agencies with greater efficiency, transparency and accountability."

With that, the President-elect took a few questions. One, from the Wall Street Journal, noted that "the real key to controlling federal spending lies with the entitlement programs.  How early do you plan on addressing Medicare and Social Security?  And what will your approach be?" The President-elect said that "we are beginning consultations with members of Congress around how we expect to approach the deficit.  We expect that discussion around entitlements will be a part, a central part, of those plans."

Mr. Obama was asked if his silence about Gaza because of his "one president at a time" mantra. "We can’t have two administrations running foreign policy at the same time," Mr. Obama said. "We cannot be sending a message to the world that there are two different administrations conducting foreign policy.  That is not safe for the American people." Asked if he was worried that the Palestinians are interpreting his silence negatively, Mr. Obama said, "I can’t control how people interpret what I’m saying."

Asked whether Roland Burris should be seated in the Senate as the junior Senator from Illinois, the President-elect said, "that is a Senate matter. But I know Roland Burris. … I think he’s a fine public servant. If he gets seated, then I’m going to work with Roland Burris just like I worked with all the other senators to make sure that the people of Illinois and the people of the country are served."   

I got a chance to ask him about the stimulus package. Here’s that exchange:

TAPPER: Thank you, Mr. President-elect. Welcome to Washington.

OBAMA: Oh, yeah. It’s great to be here. (LAUGHTER)

TAPPER: Your team has talked about the stimulus package being $675 billion to $775 billion.  But at the same time, you have distributed a memo — your team has distributed a memo in which economists say it should be between $8 billion — I’m sorry — $800 billion and $1.3 trillion.

OBAMA: Right.

TAPPER: How do you reconcile that difference? And, also, could you explain what you consider to be truly stimulative? I mean, any project will create jobs in the short term.

OBAMA: Well, we are still in consultation with members of Congress  about the final size of the package. We expect that it will be on the high end of our estimates, but will not — will not be as high as some economists have recommended, because of the constraints and concerns we have about the existing deficit.

In terms of the components of the package, as I’ve made clear over the last several days, we’re going to have a (sic) investment component designed to create or save 3 million new jobs.  Part of what the charge of my team has been is to figure out how can we make sure that even as we’re creating short-term jobs and spurring demand in the economy that we’re also laying the groundwork for long-term economic growth, which is why a lot of the stimulative — a lot of the investments are going to be around things like energy, health care, education, things that we need to be doing anyway.

Part of the stimulus package will be to provide tax relief to middle-income families, and, where it makes sense and is going to work, to provide some tax relief to businesses to spur on investment in the private sector.  And part of the package is going to be to help states who are under extraordinary budget pressures to prevent them from laying off more workers in vital service areas like teaching, law enforcement and so forth, so that not only are we saving jobs, we’re also making sure that states are able to provide basic services to their citizens at a time of critical need.  In terms of what I consider appropriate stimulus, you know, the criteria that we’ve tried to lay out is, are we able to use this money wisely, effectively, in a two-year time span so that we’re not creating long-term obligations that would add to the structural deficit that exists, but would provide an immediate boost to the economy?

And as I indicated yesterday, one of the things that I think is important is that we do not have earmarks in this package.  You know, I’ve  said before I think it’s entirely appropriate for members of Congress to want to have some say in terms of projects that take place in their district.  Many of the projects that they might advocate for are worthy.  But isn’t the place to do it. And so I think it’s important for us not to have earmarks here. It’s important for us to have transparency in how the money is spent. I intend to make sure that we have unprecedented measures to ensure that taxpayers can keep track of how this money is spent.

So if, you know, we can get this done quickly, then I’ve — I have confidence that not only are we going to be able to create jobs, but we’re also going to be making a down payment on some critical areas that, as the economy recovers and the private sector starts investing again, we’re going to see some long-term benefits and long- term savings. 

I’ll just take one example.  Part of our stimulus package is going to involve revamping all federal buildings so that they’re energy efficient.  If we — if we do that effectively then over the long-term we are going to  save billions of dollars in energy costs for the federal government and for taxpayers. That’s the kind of charge that Nancy’s going to have, is identifying where are areas where we can make big change that lasts beyond the economic recovery plan and will save taxpayer money over the long term. 

– jpt

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