Stock prices fell broadly, serving a reminder of the economic troubles confronting President Barack Obama. The key averages lost 4 percent or more.
The Dow declined 332 points to 7,949.
The S&P dropped nearly 45 points to 805.
And the Nasdaq composite lost 88 points to 1,440.
Declining issues led advancers by a 9 to 1 on the New York Stock Exchange. Volume on the NYSE came to 6 billion shares. Nasdaq stock market volume was 2 billion shares.
This week on The Bottom Line podcast: The tricky transition of financial power in Washington. We talk with Harvard economist Linda Bilmes about the kind of money crisis a President Obama will face.
Host Curt Nickisch looks at how Massachusetts is lining up the “shovel-ready” projects Obama’s calling for. And where does that buzzphrase, “shovel-ready,” come from?
Plus, author Stephen Greenspan writes a book on gullibility — and then admits he got duped by Bernard Madoff’s alleged $50 billion Ponzi scheme.
And WBUR’s David Boeri hooks up with newly laid off Bostonians trying to ease their worries with a “pink slip party,” which is apparently back in vogue these days.
WASHINGTON (AP) — Working closely with President-elect Barack Obama, House Democrats on Thursday called for $825 billion in federal spending and tax cuts to revive the moribund economy, with strong emphasis on energy, education, health care and jobs-producing highway construction.
The legislation calls for federal spending of roughly $550 billion and tax cuts of $275 billion over the next two years – totals all but certain to rise as it makes its way through Congress.
“Immediate job creation and continuing job creation” are the twin goals, Speaker Nancy Pelosi, D-Calif., said at a news conference. Joblessness has risen sharply in recent months, and Obama has warned it could reach double digits unless action is taken to invigorate the economy.
At $825 billion, the legislation would be one of the largest bills ever to move through Congress, and by traditional standards, lawmakers were moving with unusual speed. Pelosi and Sen. Harry Reid, D-Nev., the Senate Majority Leader, have pledged to have it ready for Obama’s signature by mid-February.
The measure calls for $87 billion to help the states meet the rising cost of providing health care for the poor in the recession, and another $39 billion to subsidize coverage by out-of-work wage-earners who cannot afford the cost of their employer-covered health care.
More than $100 billion is ticketed for education, including money for school districts to shield them from the effects of state cutbacks in services. Democrats also provided tens of billions in spending and tax breaks designed to lessen the nation’s dependence on oil as a principal source of energy.
“At first glance, it appears that my Democratic colleagues think they can borrow and spend their way back to prosperity with a half trillion dollars of new spending and less tax relief than President-elect Obama has been talking about,” said House Republican Leader John Boehner of Ohio.
Obama’s top aides have worked closely in recent days with Democrats in Congress to shape legislation that generally adheres to the president-elect’s wishes.
At the same time, lawmakers departed dramatically in one area, jettisoning the incoming administration’s call to give a $3,000 tax credit for each new job created by private companies.
Another key priority of the new administration was preserved, though. The summary calls for a tax credit of $500 per worker and $1,000 per working couple.
The measure does not include money to help middle- to upper-income taxpayers ensnared in the alternative minimum tax, which was originally designed to prevent the extremely wealthy from avoiding payment of taxes but now threatens more than 20 million tax filers. Several officials said the Senate was likely to include that provision in its version of the bill, a step that could push the overall total close to $900 billion.
The legislation is one of two key elements in Obama’s emerging plan to revitalize the economy. He also has lobbied lawmakers not to stand in the way of the use of another $350 billion in financial bailout money.
The Senate was expected to vote on the issue later in the day, and the outcome was so uncertain that a tie vote seemed possible. If so, the money would be released.
With unemployment rising, and applications for various forms of federal aid keeping pace, the legislation calls for increased spending on food stamps, unemployment insurance and job training. It also proposes an increase in Pell Grants for college students of $500.
House leaders called for $30 billion for highway construction and $10 billion for mass transit and rail.
The summary claimed “unprecedented accountability” and said the bill would include no earmarks, the pet projects that lawmakers are fond of.
In addition, Democrats said all announcements of contract and grant competition would be posted on a Web Site to be created by the new administration.
Funds for energy-related programs were sprinkled throughout the legislation, reflecting a priority not only of Obama, but also House Speaker Nancy Pelosi, D-Calif., and numerous lawmakers in both houses of Congress.
Included is $32 billion to upgrade the nation’s electrical distribution system, more than $20 billion in tax cuts to promote the development of alternatives to oil fuels, and billions more to make public housing, federal buildings and modest-income homes more energy efficient.
House committees are working on a schedule that calls for votes next week on parts of the bill, which would then be advanced to the floor for a vote during the last week of January.
Across the Capitol, a companion measure is expected to move along roughly the same timeline in the Senate, and congressional leaders have expressed confidence they would be able to agree on a final version by the time of a scheduled vacation coinciding with Presidents’ Day.
Other items in the measure include funds for state and local law enforcement funds, extending broadband service to rural and other underserved areas, and money to computerize health records, a key priority of the incoming president.
Businesses would be able to reduce their taxes through a provision that expands their ability to write off current losses again past profits, and by accelerating the depreciation of new plants and equipment.
First-time homeowners also would get a break. The bill eliminates the requirement for them to repay a new $7,500 tax credit created in a housing measure that passed last summer.
Ray (left) and Tom Magliozzi, circa a long time ago
This week on the Bottom Line podcast: Ray Magliozzi, on why he supports a 50-cent national gas tax: “We would want to discourage people,” Ray says, “who had no good reason to drive a pick-up truck that got 11 miles per gallon just because they wanted to commute back and forth from Home Depot just to buy plants.”
A little bit of “Car Talk” tax talk with Ray Magliozzi. Plus, WBUR’s Meghna Chakrabarti explains the pros and cons of increasing the gas tax in Massachusetts by 23 cents.
Plus, President-elect Barack Obama proposes a stimulus package as big as $800 billion. We get analysis of Obama’s first speech since the election with columnist Robert J. Samuelson of Newsweek and the Washington Post.
High-tech firm EMC, of Hopkinton, Mass., announces the layoffs of 2,400 people — even though the company boasts record profits this year. WBUR’s Fred Thys visits Hopkinton to gauge the impact on the community.
Finally, the shockwave of Bernard Madoff’s Ponzi scheme reaches the shores of tiny, tony Nantucket. It involves one of the island’s summer residents and a Bulgarian housekeeper.
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Enjoy!
WASHINGTON (AP) — President-elect Barack Obama said Thursday the recession could “linger for years” unless Congress pumps unprecedented sums from Washington into the economy.
“I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible,” Obama said in a speech set to be delivered at George Mason University in Fairfax, Va., outside Washington. Excerpts from his prepared text were released in advance by his transition team.
It was the fourth day in a row that Obama has addressed this front-burner issue and it was the highest-profile appearance yet on an issue that can define his early months in office.
His events have increasingly taken on the trappings and air of the presidency, with the speech — coming a full 12 days before he takes over at the White House — a particularly showy move. Presidents-elect typically stick to naming administration appointments and otherwise staying in the background during the transition period between Election Day and Inauguration Day, but Obama has clearly made the calculation that a nation anxious about its economic outlook and eager to bid farewell to the current president, George W. Bush, needs to hear from him differently and more frequently.
Indeed, the economic news is grim.
“A bad situation could become dramatically worse,” Obama said, painting a dire picture — including double-digit unemployment and $1 trillion in lost economic activity — that recalled the days of the Great Depression in the 1930s.
Consumers and companies are folding under the negative forces of a collapsed housing market, a global credit crunch and the worst financial crisis since the 1930s. The recession, which started in December 2007, already is the longest in a quarter-century.
A report due out the same day as Obama’s speech is expected to show that the number of newly laid-off people signing up for state unemployment insurance last week rose to 540,000, up from 492,000 in the previous week. The number of people continuing to draw jobless benefits is projected to stay near 4.5 million, demonstrating the troubles the unemployed are having in finding new jobs.
For all of 2008, employers probably slashed payrolls by at least 2.4 million. That’s based on economists’ forecasts for a net loss of 500,000 additional jobs in December, as well as the job losses previously reported. Some, however, think the number of jobs cut last month will be higher, around 600,000 or 700,000. The Labor Department will release that report Friday.
A day after the release of a stunning new estimate — that the federal budget deficit will reach an unprecedented $1.2 trillion this year, nearly three times last year’s record. Obama acknowledged some sympathy with those who “might be skeptical of this plan” because so much federal money has already been spent or committed in an attempt — largely unsuccessful so far — to get credit, the lifeblood of the American economy, flowing freely once again.
Such statements are coded to appeal to budget hawks in both parties, whom Obama wants to win over so that approval of a package draws wide, bipartisan support in the Democratic-led Congress.
To answer their concerns, he promised to allow funding only for what works. He also pledged a new level of transparency about where the money is going. A day earlier, he promised to tackle the out-of-control fiscal problem posed by Social Security and Medicare entitlement programs and named a special watchdog to clamp down on all federal programs.
Obama made broader arguments, too, saying that the private sector, typically the answer, cannot do what is needed now.
“At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe,” he said.
Obama’s transition team and Democratic congressional leaders are working daily to hammer out the still-evolving package, expected to total nearly $800 billion. The initial hope had been to have a new stimulus package approved by Congress in time for Obama to sign it upon taking office on Jan. 20. That timeline has slipped considerably, into at least mid-February if not later.
The package is expected to include tax cuts for businesses and middle-class workers, money to help cash-starved states with Medicaid programs and other operating costs, and a huge share for infrastructure building, investments in energy efficiency and a rebuilding of the information technology system for health care. Much of the latter portions of the plan are aimed at what Obama likes to talk about as the need for “reinvestment” and not just “recovery.”
Obama also promised action to address the economy’s ills beyond the package, such as tackling the massive wave of home foreclosures many experts expect, preventing the failure of financial institutions, rewriting financial regulations and keeping accountable the “Wall Street wrongdoers” who engage in risky investing.
This week on the new Bottom Line podcast: President-elect Barack Obama says he’s disappointed about the apparent collapse of a $14 billion bailout for U.S. automakers. We speak with two big thinkers about the debate: John Paul MacDuffie, co-director of the International Motor Vehicle Program, a research consortium at MIT; and David Rothkopf, an undersecretary of commerce in the Clinton administration.
And like a lot of people in Detroit, Bishop Charles Ellis is praying for the industry’s salvation. He made headlines this week after bringing American-made SUV’s into the sanctuary for Sunday services.
Porsche Crawford, left, Terrell Byes and Lynette Clark, right, dance during hymns with a Ford Escape Hybrid, a Chevrolet Tahoe Hybrid, and a Chrysler Aspen Hybrid behind them at the Greater Grace Temple, a Pentecostal church in Detroit Sunday, Dec. 7, 2008. (AP Photo)
Struggling homeowners are wondering if they’ll get a bailout. We speak to Wall Street Journal reporter Michael Corkery on what Washington is doing about the foreclosure crisis now — and what to expect once Obama takes office next month.
Meanwhile, Miami housing activist Max Rameau is putting up homeless people in foreclosed homes. It’s totally illegal, but he says people deserve houses, not banks.
Catch up on the week’s economic news with the Bottom Line podcast.
Gov. Deval Patrick and other governors wait for the arrival of President-elect Barack Obama at the bipartisan meeting of the National Governor's Association yesterday in Philadelphia. (AP)
The goals of the Obama administration’s economic recovery plan — job creation through broad infrastructure improvements — are closely aligned with goals that Massachusetts is already working on, Gov. Patrick says.
Patrick and other governors met yesterday with President-elect Obama (NPR), who promised them swift action on an economic plan to deal with the national recession.
Patrick told WBUR this morning that Massachusetts is faring relatively better than many other states, but also said it will have to suspend contract negotiations with state workers because of the economic downturn.
“The state just doesn’t have the cash right now to pony up,” Patrick said. Get the full interview (Real Audio).
