Obama Adds $60 Billion to Economic Plan; McCain Expected to Unveil Proposals Today

By Robert Barnes and Shailagh Murray
Washington Post Staff Writers
Tuesday, October 14, 2008

TOLEDO, Oct. 13 -- Democrat Barack Obama advocated an immediate and expensive economic assistance package Monday, while Republican John McCain readied a set of specific new proposals of his own, as the candidates entered a three-week sprint toward a presidential election that appears certain to turn on fixing the nation's faltering economy.

Obama consulted with Democratic congressional leaders and then proposed an additional $60 billion in tax breaks and other benefits for his economic stimulus plan. He and House Speaker Nancy Pelosi said they favor a lame-duck session of Congress immediately after the Nov. 4 election to pass such a measure.

"We can't wait to help workers and families and communities who are struggling right now -- who don't know if their job or their retirement will be there tomorrow, who don't know if next week's paycheck will cover this month's bills," Obama said at a speech here.

McCain delayed announcing new proposals until Tuesday, and he used a speech in Virginia Beach to offer a gloomy assessment of the country's financial status, present himself as the tested leader ready to address problems, and to separate himself from the policies of President Bush.

In the face of new polls that showed a widening Obama lead, McCain instead bucked up a boisterous crowd of about 12,000 with a pledge to "never give up" the fight to lead the nation.

"Senator Obama is measuring the drapes, and planning with Speaker Pelosi and Senator [Harry M.] Reid to raise taxes, increase spending, take away your right to vote by secret ballot in labor elections and concede defeat in Iraq," he said. "You know what they forgot? They forgot to let you decide. My friends, we've got them just where we want them."

In delving more and more into the specifics of potential financial remedies, Obama and McCain are moving beyond trying to convince voters that he is best prepared to handle the crisis to offering specific proposals for relief, particularly to voters who think that "Main Street" was not addressed when Congress passed a plan to rescue Wall Street.

Polls show that the economy is by far the most important issue to voters. In a recent Washington Post-ABC News survey, 53 percent of respondents said it will be the decisive issue, as opposed to 11 percent who cited national security.

Having specific programs and proposals may also be crucial in Wednesday night's final presidential debate, in Hempstead, N.Y., which is slated to focus on domestic issues.

Obama largely avoided mention of McCain on Monday and instead focused on his new proposals.

"It's a plan that begins with one word that's on everyone's mind, and it's spelled J-O-B-S," he said.

The proposals include:

· A temporary tax credit for firms that create jobs in the United States.

· Penalty-free 401(k) and IRA withdrawals through 2009, to allow struggling families to withdraw up to 15 percent of their savings, up to $10,000. (Obama acknowledged that McCain had earlier proposed a similar but more limited plan.)

· A 90-day foreclosure moratorium for homeowners making "good-faith efforts" to keep up with their mortgage payments.

· A new entity created to lend to state and local governments, allowing for an effort similar to the liquidity assistance that the Federal Reserve recently extended to commercial banks.

· The temporary elimination of taxes on unemployment insurance benefits.

[McCain economic policy adviser Douglas Holtz-Eakin told the Reuters news service Tuesday morning that the senator from Arizona would outline an estimated $52.5 billion in new proposals. Most of that would go to pay for a lower tax rate of 10 percent on money that seniors withdraw from IRAs and 401(k) retirement plans in 2009 and 2010, Holtz-Eakin said. McCain would also propose expanding the tax deduction for investment losses to $15,000 a year for the tax years 2008 and 2009, the aide told Reuters.]

Obama also raised the prospect of government aid to the automobile industry and more aggressive federal action to help banks and free up consumer credit. He has already outlined benefits such as a middle-class tax break -- delivered immediately in the form of a check -- and small-business incentives that would total about $115 billion over two years.

"CEOs got greedy. Politicians spent money they didn't have. Lenders tricked people into buying homes they couldn't afford, and some folks knew they couldn't afford them and bought them anyway," Obama said as the crowd of about 3,000 applauded. "We've lived through an era of easy money, in which we were allowed and even encouraged to spend without limits; to borrow instead of save."

He conceded: "For many folks, this was not a choice but a necessity. People have been forced to turn to credit cards and home-equity loans to keep up, just like our government has borrowed from China and other creditors to help pay its bills. But we now know how dangerous that can be. Once we get past the present emergency, which requires immediate new investments, we have to break that cycle of debt."

The Toledo speech coincided with a meeting of House Democratic leaders to discuss action on a stimulus bill when the chamber reconvenes, as planned, after the election.

Exiting what she called an economic summit, Pelosi told reporters that the nation is in "survival mode." Declining to outline a specific plan, she appeared with a group of liberal economists who endorsed a massive federal government investment in infrastructure and cash transfers to state and local governments that are facing shortfalls and layoffs. They also endorsed another 13-week extension of unemployment benefits.

Pelosi said the new proposals are a necessary counterpoint to the $700 billion rescue plan Congress passed for Wall Street.

"It seemed it was a largely Republican package with largely Democratic votes. If it's going to happen that way, we might as well write the bill ourselves and do the right thing for the American people," she said.

On a conference call with reporters, Holtz-Eakin called Obama's new ideas "hypocrisy."

He accused the Democrat of supporting tax increases that would more than offset the tax credit he proposed Monday. And he said Monday's proposals would "hardly undo" the damage to the economy created by Obama's plan to boost the top marginal income tax rates.

"He pretends to offer a, quote, 'rescue,' " he said of Obama. "But the rescue is simply from the threat of his own policies."

McCain spokesman Brian Rogers said it was always the campaign's intention to devote Monday's speech to "John McCain's view of this race and what the stakes are."

In his address, McCain frankly acknowledged that he is behind in polls but said he has been counted out before.

McCain portrayed himself as the pugnacious underdog. He revived his acceptance speech at the Republican National Convention and used a version of the word "fight" at least 17 times.

"What America needs in this hour is a fighter, someone who puts all his cards on the table and trusts the judgment of the American people," he said. "I come from a long line of McCains who believed that to love America is to fight for her. I have fought for you most of my life."

He added: "There are other ways to love this country, but I've never been the kind to do it from the sidelines."

He also sought to put light between himself and the current occupant of the White House. The next president "will need experience, courage, judgment and a bold plan of action to take this country in a new direction," McCain said. "We cannot spend the next four years as we have spent much of the last eight: waiting for our luck to change."

The settings for Monday's events told much about the campaign's state of play. McCain was on the stump in Virginia -- where no Democratic presidential candidate has won since Lyndon B. Johnson carried it in 1964 -- and North Carolina, which has a 24-year streak of supporting Republican White House candidates. Polls show Obama ahead in the Old Dominion and running close in the Tar Heel State.

Obama, meanwhile, continued his habit of conducting his debate preparations in red states. He readied for the first debate in Florida and the second in North Carolina and is now in Ohio -- all states that voted for Bush in 2004.

Staff writers Michael D. Shear, traveling with McCain, and Paul Kane in Washington contributed to this report.

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