Virginia - President-elect Barack Obama on Thursday proposed tax cuts and a green energy push to avert economic disaster, but drew a sceptical reaction in congress to aspects of his huge stimulus package.
"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 his first set-piece speech since his election triumph.
"If nothing is done, this recession could linger for years," he said, in an appeal to both Congress and the public 12 days before his inauguration to back a stimulus bill expected to total at least $775bn.
But top Democratic senators emerged from a two-hour meeting with top Obama aides on Capitol Hill openly questioning whether a $300m dollar tax cut included in the plan would ignite growth and create jobs.
And Republican lawmakers baulked at the costs of the plan and worried about how much it would add to an already huge budget deficit, tipped to hit $1.2 trillion this year.
But without action, Obama warned, "the unemployment rate could reach double digits," and that an entire generation's potential might be thwarted and the United States could lose its global competitive edge.
"In short, a bad situation could become dramatically worse," he told a packed audience at George Mason University in Washington's Virginia suburbs, an institution that is ironically a bastion of free-market economic theory.
Obama has already vowed a nationwide program of repairs to "crumbling" roads, bridges and schools, a roll-out of broadband internet across rural America and federal aid to cash-strapped US states.
In the speech, he pledged a $1 000 tax cut for 95% of working families as the "first stage" of a program of tax relief that would extend into the government's next budget.
Right balance
Production of alternative energy would be doubled in the next three years, Obama said, and more than 75% of federal buildings and two million homes would be modernized to slash billions from power bills.
The president-elect promised a new "smart" electricity grid to cut blackouts and deliver new forms of energy to homes and businesses.
And he said all patients' medical records would be computerised within five years, saving lives and billions of dollars.
"I understand that some might be sceptical of this plan," Obama said.
But what he calls the American Recovery and Reinvestment Plan "won't just throw money at our problems - we'll invest in what works."
Despite expanded Democratic control of both the Senate and House of Representatives, Obama wants convincing majorities of lawmakers to sign on, and that means mollifying Republican critics.
Republican leaders welcomed Obama's proposal for tax cuts, which he says will total 40% of a final package that some economists say could reach up to $1.2 trillion dollars.
But House Republican leader John Boehner said "it is very important as we go ahead that we find the right balance.
"Yes our economy needs help, but at the end of the day how much debt are we going to pile on future generations?" he told reporters. "We cannot buy prosperity with more and more government spending."
Fiscal disaster
Some Democrats also criticized a planned $3 000 tax break for companies that hire new workers and a family tax cut as being insufficient.
The corporate tax break was "unlikely to be effective," said Kent Conrad, chairperson of the Senate budget committee.
"Business people are not going to hire people to produce products that are not selling," he told reporters.
Other lawmakers also doubted that tax cuts for families of $1 000 dollars would ignite the necessary spurt in consumer spending.
Lawmakers from both parties expressed profound alarm when the Congressional Budget Office Wednesday forecast the US deficit will reach a jaw-dropping $1.2 trillion in this fiscal year.
"President Obama is walking into a fiscal disaster of stunning proportion, coupled with an economic downturn of unknown duration and depth," Conrad said.
In his speech, Obama acknowledged the costs of his stimulus plan would drive the deficit still higher.
"But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes, and confidence in our economy," he said.
- AFP