WASHINGTON — After consulting with economists from across the political spectrum, President-elect Barack Obama’s advisers are contemplating an economic recovery plan that could cost as much as $1 trillion over two years.
The figure is far bigger than the $600 billion that Obama’s team initially envisioned.
A number of economists, including former advisers to Republican presidential candidate John McCain, have suggested to Obama’s team that the economy needs a much bigger cash infusion, possibly up to a $1 trillion over two years.
Obama’s top economic advisers solicited the opinions as they worked to assemble a spending plan that would meet Obama’s goal of saving or creating 2.5 million jobs over two years.
Obama advisers say his team has not settled on a figure. But the advice represents a far bigger sum than his advisers had considered.
Under scenarios envisioned by his economic team, a $600 billion package would satisfy Obama’s jobs goal by the first quarter of 2011, but would leave an unemployment rate of 8 percent two years from now.
Obama’s economic team believes that to put unemployment on a downward trajectory with a goal of 7.5 percent or less over two years would require a stimulus package of about $850 billion. That would generate about 3.2 million jobs by the first quarter of 2011.
Obama advisers say they agree with economic forecasts that predict that without a government infusion, unemployment will rise above 9 percent and not begin to come down until 2011.
Among those whose opinions Obama advisers sought were Lawrence Lindsey, a top economic adviser to President George W. Bush during his first term, and Harvard professor Martin Feldstein, an informal McCain adviser and former chairman of the Council of Economic Advisors under President Ronald Reagan.
Feldstein recommended a $400 billion investment in one year, Obama aides said. Lindsey told Obama’s team that a package should be in the range of $800 billion to $1 trillion. The advisers revealed the discussions on the condition of anonymity because no decisions had been reached.
“I do recommend $400 billion in year one and expect a similar amount in year two,” Feldstein said in an e-mail message. “The right amount depends on how it is used.”
Obama’s team has been spending the past several weeks reviewing economic data and consulting with experts to arrive at a dollar figure considered large enough to turn around the sinking economy. Many economists agree that an infusion of government spending is critical to get out of a recession.
A stimulus package that approaches $1 trillion, however, could run into significant Republican opposition in Congress. It also could cause heartburn for moderate and conservative Democratic lawmakers, known as Blue Dogs, who are budget hawks and loathe large budget deficits.
Obama has said he wants Congress to assemble a recovery package that includes massive spending on highway and bridge repairs and maintenance, new and upgraded schools, energy-efficient government buildings and a host of new environmentally friendly technologies.
This week, House Speaker Nancy Pelosi said Democrats are preparing a recovery bill in the range of $600 billion, blending immediate steps to counter the slumping economy with longer term federal spending that encompasses Obama’s plan.
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