Obama gives stimulus package priority

Democratic officials made clear on Sunday that the cost of Barack Obama’s economic rescue plan would run into hundreds of billions of dollars and hinted he was prepared to hold off introducing new taxes for his first two years as president.

David Axelrod, Mr Obama’s chief political adviser, said passing a massive economic stimulus package would be the president-elect’s top priority when he took office in January, amid deepening fears of a long and severe recession.

Mr Obama is expected to flesh out his plans on Monday when he holds a news conference to announce his choice of Tim Geithner, president of the Federal Reserve Bank of New York, to succeed Hank Paulson as Treasury secretary.

Over the weekend, the president-elect revealed the outlines of a sweeping programme aimed at creating or saving 2.5m jobs by January 2011 through investment in infrastructure, public services and “green” technology.

“Our hope is that the new Congress begins work on this as soon as they take office in early January,” Mr Axelrod told Fox News.

Austan Goolsbee, a senior economic adviser to Mr Obama, confirmed the plan would be significantly bigger than the $175bn stimulus package proposed during the presidential campaign because the economy had got “substantially worse” since then. “We’re out with the dithering. We’re in with a bang,” he told CBS’s Face the Nation.

Chuck Schumer, a leading Democratic senator, predicted it could be as much as $500bn-$700bn. “It’s a little like having a new New Deal, but you have to do it before the Depression. Not after,” he told ABC’s This Week.

Mr Schumer predicted strong Democratic support on Capitol Hill but Republicans expressed caution about the prospect of sharply increased government spending. “I don’t think we want to empower government here and keep bureaucrats employed,” said John Boehner, House minority leader.

In an olive branch to Republicans, Mr Axelrod floated the possibility that the president-elect might wait for the Bush tax cuts to expire in 2010 rather than acting sooner to raise rates for high earners.

Investors reacted enthusiastically to the prospect of Mr Geithner’s appointment, pushing the S&P index up 6 per cent after the news leaked on Friday.