-- Democratic presidential candidate Barack Obama on Monday proposed additional measures he says will jump-start the economy and protect investors, including tax credits for businesses that hire new workers and penalty-free withdrawals from retirement funds.
"Right now we face an immediate economic emergency that requires urgent action," the Illinois senator told an audience in Toledo, Ohio. "Congress should pass this emergency rescue plan as soon as possible."
In a conference call with reporters, Obama economic adviser Jason Furman said that the Democrat's proposals, combined with earlier economic stimulus proposals, would cost $175 billion over two years and would increase the federal deficit — a move Obama is willing to make to respond to the economic emergency.
"Our biggest priority next year is to avoid a very deep recession," Furman said.
McCain advisers criticized the Obama proposals as spendthrift and counterproductive.
"More spending is going to make the situation worse," said Rob Portman, a former budget director for President Bush. Allowing retirement fund withdrawals, he said, would only encourage Americans to cash in their stocks at their lowest value.
McCain's senior policy director, Douglas Holtz-Eakin, said McCain will unveil additional ideas for dealing with the economic crisis today. McCain is scheduled to speak in Blue Bell, Pa.
Key elements of the Obama plan:
• Penalty-free withdrawals of up to $10,000 from IRAs and 401(k)s in tax years 2008 and 2009.
• A $3,000 tax credit for every new full-time job created in the USA by businesses in 2009-10.
• A requirement that banks benefiting from the federally funded bailout provide a 90-day moratorium on foreclosures to give homeowners time to work out a payment plan.
• Empowering the Federal Reserve to provide short-term loans to state and local governments caught in the credit crunch.
Nariman Behravesh, chief economist at the consulting firm Global Insight, gave Obama's proposals an overall grade of B. He gave the most favorable reviews to the Democrat's plans for giving Americans more flexibility with their retirement funds and for helping cash-strapped state and local governments. He questioned the value of a foreclosure moratorium, however, pointing out that most mortgages have been resold so many times, "it's unclear who's actually holding the assets."
With the election three weeks away, Republicans and Democrats on Capitol Hill also sought to be responsive to the economic slowdown. All 435 House seats and 35 of the Senate's 100 seats are at stake this fall.
House Minority Leader John Boehner, R-Ohio, said further congressional action to stimulate the economy "should not wait until January." Boehner proposed a series of tax cuts, including one that would lower or eliminate taxes on corporations that buy distressed assets like mortgage-backed securities and another that would extend the $250,000 capital gains tax exemption to investment property.
House Speaker Nancy Pelosi, at a news conference, said Democrats will hold hearings in coming weeks on various economic proposals. She was non-committal on whether she would call lawmakers back to town after the elections for a lame-duck session.
House Financial Services Committee Chairman Barney Frank, who joined Pelosi at the briefing, said his committee will consider "sensible regulation" of derivatives, financial instruments that contributed to the crisis. They amount to bets between financial institutions on the value of stock prices, index or underlying assets. "A failure to regulate the economy appropriately is what led to this mess," said Frank, D-Mass.
In an interview, Frank criticized Boehner's proposal as being too focused on business. "It's time to give direct help to average citizens and that just doesn't do it," Frank said.