By David Cho, Michael D. Shear and Michael S. Rosenwald
Washington Post Staff Writers
Saturday, November 8, 2008
With fresh evidence that the U.S. economy is shedding jobs even faster than expected, President-elect Barack Obama said yesterday that his top concern is passage of a multibillion dollar stimulus package to create jobs.
In his first news conference since winning the presidency, Obama said he would tackle the nation's financial crisis "head on" and called on Congress and the White House to approve a stalled stimulus plan that could include money for new public works projects and aid for the nation's teetering automakers. If it does not get passed soon, he said, "it will be the first thing I get done as president of the United States."
Obama's remarks followed a meeting in Chicago of his top economic advisers and a spate of dire news on the economy. The government said 240,000 jobs were lost in October and the unemployment rate surged to 6.5 percent, its highest level since 1994. GM and Ford reported massive losses for the third quarter and warned that they need government aid because if the economic situation fails to improve, they run the risk of not having enough cash to operate.
"Tens of millions of families are struggling to figure out how to pay the bills and stay in their homes," Obama said, standing before a row of economic luminaries such as former Treasury secretary Robert E. Rubin and former Federal Reserve chairman Paul A. Volcker. "Their stories are an urgent reminder that we are facing the greatest economic challenge of our lifetime, and we're going to have to act swiftly to resolve it."
The president-elect called on members of both parties to "set politics aside for a while" to deal with the economic crisis. Yet politics continued in Washington as congressional Democrats and the White House clashed over the stimulus package and free trade agreements.
The White House signaled yesterday that it is likely to oppose stimulus proposals from Democrats, arguing that the ideas mentioned so far would have little immediate impact and that the $700 billion rescue plan approved last month needs more time to play out.
The outlines of the Democrats' stimulus plan are similar to the version the House approved Sept. 26, providing a 13-week extension of unemployment benefits as well as increased funding for food stamps, infrastructure projects and to states for Medicaid costs. Also on the table is a proposal to double the $25 billion in low-interest loans to automakers to produce more fuel-efficient vehicles.
Speaking to reporters before Obama's news conference, White House spokesman Tony Fratto said the administration would review any legislation but that the stimulus proposals floated by Democrats are "very limited and very forward-looking and long range," such as large-scale public infrastructure projects that could take years to complete.
Fratto also dismissed proposals for another extension of unemployment benefits, noting that one extension had already been approved and that some states could extend benefits further with federal matching funds.
Issuing a threat to the Bush administration, House Majority Leader Steny H. Hoyer (D-Md.) said Democrats were prepared to forgo a planned lame-duck congressional session unless President Bush commits to a compromise stimulus bill.
"We still don't have any agreement," Hoyer said. "Clearly there's no point in us doing something if the administration is going to take the position that they're not going to sign something."
Leaving Congress shuttered would close the door on Bush's legislative accomplishments, a particular blow to his free-trade agenda as the long-sought pact with Colombia still awaits House and Senate approval.
"Our view on Colombia is that Colombia deserves to get done on its own merits. As for what Democrats want to get done, they haven't spelled that out," Fratto said later. "We can't get this done by smoke signals. They have to be clear about their intentions."
Democrats could simply wait until the new administration takes office in January to pass a stimulus package. Yesterday, Obama said he wanted to see the measure pass "sooner rather than later."
Obama said he would review how the Treasury is implementing its plan to spend $700 billion to rescue the financial markets, including whether bank executives receiving government help are being unduly rewarded by their firms. He added that he would move with "all deliberate haste" to make appointments and order his transitional economic team to work on additional options to aid automakers.
The team, drawn from a broad swath of academia and finance, convened behind closed doors at the Hilton Chicago. Members included former Treasury secretary Lawrence H. Summers, newly appointed chief of staff Rahm Emanuel, Vice President-elect Joseph R. Biden, Michigan Gov. Jennifer M. Granholm (D) and Time Warner chairman Richard Parsons. Billionaire investor Warren E. Buffett participated via speakerphone. Buffett is a director of The Washington Post Co.
Obama's comments came on a day when two Detroit automakers reported larger-than-expected quarterly losses: Ford lost $129 million while General Motors lost $2.5 billion. The GM news was especially dour, with the company saying that by the end of the year its cash situation would approach "the minimum amount necessary to operate its business."
Meanwhile, poor quarterly results continued streaming in from other sectors of the economy. Sprint Nextel lost $326 million. Genworth Financial, an insurance company, lost $258 million. Sunrise Senior Living, a McLean firm, lost $68.7 million. Among the bright spots: pawnshop operator Ezcorp, which reported a 44 percent profit jump.
The nation's unemployment rate surged 0.4 percent in October, topping off at 6.5 percent, the highest level in 14 years. Many economists think the nation is headed for 8 percent unemployment, a figure not seen in a generation.
Last month, as the financial crisis escalated and companies lost access to credit, nonfarm payroll fell by 240,000 jobs, about 40,000 more than economists predicted. Adding to the grim picture, the government revised job loss figures from August, which jumped to 127,000 from 73,000, and September, which shot up to 284,000 from 159,000. In total, more than 10 million people are now without jobs.
"We are losing jobs faster than official statistics suggested before and faster than most people were expecting now," said William Cheney, chief economist at John Hancock Financial Services. "This shows that the job market over the last couple months has taken a dramatic turn for the worse."
Almost no sector has been immune to sharp declines in employment. Retail jobs fell by 38,000 in October, with car dealer and department store payrolls taking the worst hits. Construction jobs fell by 49,000. Financial sector jobs fell by 24,000. Manufacturing, down 90,000 jobs, was the hardest hit, though that figure includes 27,000 striking Boeing workers.
Economists said the rapid rate of job losses would beget more job losses.
"As job destruction takes hold it effects consumer spending, demand weakens, and then companies need to cut more jobs as demand for their products weakens," said Joshua Shapiro, chief U.S. economist at MFR. "We're still in the relatively early stages of this. To expect this to be painless and short is delusional."
Wall Street seemed to shrug off the news, with the Dow climbing 248 points, or nearly 3 percent, as traders bargain-hunted following two days of steep declines.
Staff writers Paul Kane, Dan Eggen and Lori Montgomery contributed to this report.