Obama: It's Likely to Get Worse Before It Gets Better

President-elect unveils new economic team

President-elect Barack Obama named his economic team Monday, tapping New York Federal Reserve President Tim Geithner as treasury secretary to deal "an economic crisis of historic proportions."

At a news conference 57 days before his inauguration, Obama also said Lawrence Summers would be director of his National Economic Council. Summers was treasury secretary under former President Bill Clinton and a former president of Harvard University.


Obama said that recent news "has made it even more clear that we are facing an economic crisis of historic proportions." Offering a grim prediction, he added, "Most experts now believe that we could lose millions of jobs next year."

He said his newly named economic team offered "sound judgment and fresh thinking" at a time of economic peril.

Obama stepped to the microphones one day after his aides urged the incoming Democratic-controlled Congress to work with unusual speed in passing an economic stimulus package. Some lawmakers have said a measure in the range of $700 billion over two years may be passed, in hopes of achieving the president-elect's goal of securing 2.5 million jobs.

Obama takes the oath of office on Jan. 20 as the nation's 44th president, and will confront economic difficulties as great as any since the Great Depression in the 1930s. Congress begins its work on Jan. 6.

"The economy is likely to get worse before it gets better," he said in a downbeat forecast, delivered as Americans head into the year-end holiday season.

At the same time, he expressed confidence the nation would weather the crisis "because we've done it before."

He called on Congress to start work on an aggressive plan when it is sworn in January, so that his administration can, as he put it, "hit the ground running."

He declined to say how big a spending package he wants to revive the economy, but he said, "It's going to be costly." Some Democratic lawmakers are speculating about a two-year measure as large as $700 billion.

Obama pledged to honor the commitments the outgoing Bush administration has made to rescue financial markets.

Obama wants action that will stabilize the financial system and get credit flowing, as well as create jobs in areas including rebuilding infrastructure and creating clean energy.

The president-elect was mildly critical of the Big Three automakers, saying he was surprised they did not have a better-thought-out plan for their future before asking Congress to approve $25 billion in emergency loans.

He said once he sees a plan, he expects "we're going to be able to shape a rescue."

Obama also announced two other members of his economic team in the making. He named Christina Romer as chair of his Council of Economic Advisers, and Melody Barnes as director of his White House Domestic Policy Council.

The emphasis on the economy began Saturday when Obama outlined the framework to save or create 2.5 million jobs by the end of 2010. The scope of the recovery package is far more ambitious than Obama had spelled out during his presidential campaign, when he proposed $175 billion of spending and tax-cutting stimulus. The new plan will be significantly larger and incorporate his campaign ideas for new jobs in environmentally friendly technologies — the "green economy." It also would include his proposals for tax relief for middle- and lower-income workers.

In the latest bailout, the U.S. government announced late Sunday it had agreed to shoulder hundreds of billions of dollars in possible losses at the banking giant Citigroup, and to put a fresh $20 billion into the stricken company.

President George W. Bush said he consulted with Obama on the Citigroup rescue, noting "close cooperation" between his administration and the incoming Obama camp.

Also Monday, the president-elect and his wife, Michelle, say Desiree Rogers, the president of social networking at Allstate Financial, will be White House social secretary.

Rogers previously worked as utilities president of Chicago-based natural gas company Peoples Energy and as director of the Illinois Lottery.

Melissa Winter, Mrs. Obama's traveling chief of staff during the campaign, will join the White House team as deputy chief of staff to the first lady.

The move to rescue Citigroup is the latest in a string of high-profile government bailout efforts. The Fed in March provided financial backing to JPMorgan Chase's buyout of ailing Bear Stearns. Six months later, the government was forced to take over mortgage giants Fannie Mae and Freddie Mac and throw a financial lifeline — which was recently adjusted — to insurer American International Group.

Top aides said Sunday that Obama wants Congress to use its large Democratic majority when it convenes Jan. 6 to prepare tax cuts for low- and middle-income earners as part of the massive government intervention designed to pull the country out of its frightening economic nosedive.

Some economists have endorsed spending up to $600 billion to revive the economy. Sen. Charles Schumer, a New York Democrat, and former labor Secretary Robert Reich, a member of Obama's economic advisory board, both suggested $500 billion to $700 billion. Before winning the presidency Nov. 4, Obama had said he looked to create a $175 billion stimulus package. While the new plan will be significantly larger, it was expected to incorporate his campaign other ideas for new jobs in environmentally friendly technologies and tax cuts.

"I don't know what the number is going to be, but it's going to be a big number," Obama economic adviser Austan Goolsbee said on Sunday. "It has to be. The point is to, kind of, get people back on track and startle the thing into submission."

Over the weekend Obama directed his team to erect plan to create 2.5 million new jobs by the end of 2010, and aides said his broader economic program was designed to quickly offer tax relief to lower-and middle-income earners.

Significantly, the plan would not offer an immediate tax increase on wealthy taxpayers. During the campaign, Obama said he would raise taxes on people making more than $250,000. On Monday he signaled his intention to go forward with the tax hike on wealthier earners but was less clear on when that might occur, suggesting it might wait until those cuts expire in 2011.

Copyright AP - Associated Press
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