By Lori Montgomery and Kendra Marr
Washington Post Staff Writers
Friday, November 7, 2008
As the euphoria of the election gave way yesterday to more sobering evidence of decline in the global economy, Democrats moved swiftly to convert their mandate into an economic action plan that could include up to $100 billion in immediate stimulus spending and new tax cuts for the middle class early next year.
In Chicago, President-elect Barack Obama laid plans to meet today with his economic brain trust and conduct his first news conference since election night. In Washington, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) huddled in separate meetings with top executives of Detroit's automakers, who appealed for additional government help to save the industry from collapse.
The meetings come against a backdrop of continued bleeding in the economy, both domestic and abroad. On Wall Street, stocks took another dive, their second consecutive day of big losses. After a nearly 500-point loss Wednesday, the Dow Jones industrial average was down 4.9 percent, or 443.48 points yesterday, ringing up its biggest two-day percentage drop in more than 20 years.
Already alarmed by continued weakness in the auto and retail sectors, investors were anxiously awaiting today's unemployment figures, which were projected to show that the country had lost 200,000 more jobs.
Meanwhile, central banks across Europe cut interest rates yesterday in recognition that the economic outlook there and around the world was darkening rapidly. The Bank of England cut its bank lending rate to 3 percent, the lowest in more than 50 years, as the International Monetary Fund issued projections signaling a coming global recession.
In hopes of calming panicky markets, Obama is scheduled to meet Monday with President Bush at the White House, a meeting intended to showcase their desire for a smooth transition. Obama will not attend a global economic summit to be held in Washington next weekend, a senior official said, a sign that the outgoing president and his successor are still negotiating the parameters of what will be a delicate relationship over the next two months.
So far, Bush has given little indication that he plans to allow the election results to alter his course in the final months of his presidency.
"He doesn't change his principles or his policies," White House Press Secretary Dana Perino told reporters yesterday.
That stance extends to proposals for stimulus spending that include provisions the White House opposes, such as fresh spending for public works projects, Perino said. Although the White House has left the door open to a stimulus package, it has yet to engage in talks with Democrats. "We've long said that the package that they have put forward so far was not something we thought that we could support," Perino said.
Democrats are working on a $100 billion spending package that could be considered as early as this month if the Bush administration drops its opposition and agrees to negotiate a measure the president will sign. That package will probably include money for public works projects to create jobs, a 13-week extension of unemployment benefits, additional funds for food stamps and aid to strapped state governments struggling to cover the rising cost of heath care for the poor.
Automakers hope it will also contain another round of low-interest loans for them to retool factories for the production of fuel-efficient vehicles. Congress has already approved a $25 billion loan package. Lawmakers are also considering tax credits for car purchases aimed at driving up demand in the worst slump in auto sales in nearly a quarter-century.
Another stimulus package, to be assembled after Obama takes office in January, could grow to well over $100 billion and would include a permanent tax cut for moderate and lower-income families, Democrats said yesterday. Details of that package have yet to be worked out, but Democratic aides said the tax cut would be designed to appear immediately in people's paychecks.
Some key lawmakers argue that Democrats should go beyond a quick tax cut to boost consumer activity and swiftly implement all of Obama's proposals to ease the tax burden on the middle class. That would include a variety of targeted tax credits for working families, the elderly and college students, as well as legislation to extend the Bush tax cuts past their 2010 expiration date for families earning less than $250,000 a year.
"Substantial parts, if not all, of his tax-relief proposals will be passed as part of an economic recovery plan soon after the new Congress convenes in January," said Rep. Chris Van Hollen (D-Md.), an influential member of the House leadership who led party efforts to expand the Democratic majority.
"This was a major part of the campaign. It got a lot of attention," Van Hollen said. "Acting now is the best decision from both a policy perspective and a political perspective."
That approach may run into trouble, however, among fiscal conservatives in the Democratic Party, who want Congress to cover the cost of any permanent programs -- whether spending on health care or tax cuts for the middle class -- by raising taxes elsewhere or cutting spending. And the Obama tax agenda is not cheap. The nonpartisan Tax Policy Center estimates that it would add nearly $3 trillion to the deficit over the next decade.
Though extending the Bush tax cuts would normally attract Republican votes, Democrats want to rescind the cuts for families earning more than $250,000 a year, a move the GOP opposes and one that economists say would be unwise during a recession. Van Hollen said the tax increase for wealthy families could be delayed a year or so. But some tax analysts said they would be surprised if Obama encouraged lawmakers to dive immediately into that part of his agenda.
Democrats said they did not plan to include tax reductions in the stimulus package that could be taken up this month, though business groups have submitted a lengthy wish list.
In yesterday's meetings with Pelosi, Reid and other lawmakers, the car company executives were joined by Ron Gettelfinger, president of the United Auto Workers. His presence was meant to be a stark reminder that hard times for the automakers could threaten the livelihoods of thousands of union workers who were instrumental in helping Democrats take back the White House on Tuesday. General Motors issued a statement saying that the automakers had a "very frank and constructive discussion" with Pelosi.
But neither Reid nor Pelosi made any promises, and Reid issued a statement calling on the Bush administration "to exercise its existing authority to provide additional help to these firms."
Staff writer Anne E. Kornblut contributed to this report.