Excerpts
In an address here (TOLEDO, Ohio), Mr. Obama, the Democratic presidential nominee, proposed giving employers a $3,000 tax credit for each new hire to encourage job creation. He said he would seek to allow Americans of all ages to borrow from retirement savings without a tax penalty; to eliminate income taxes on unemployment benefits; and to double, to $50 billion, the government’s loan guarantees for automakers.
Mr. Obama also called on the Treasury and the Federal Reserve to create a mechanism to lend money to cities and states with fiscal problems, and to expand the government guarantees for financial institutions to encourage a return to more normal lending. He also proposed a 90-day moratorium on most home foreclosures; it would require financial institutions that take government help to agree not to act against homeowners who are trying to make payments, even if not the full amounts.
“We need to give people the breathing room they need to get back on their feet,” Mr. Obama told a crowd of more than 3,000 people at the SeaGate Convention Centre in downtown Toledo.
Mr. Obama’s Republican rival, Senator John McCain, will make new proposals for the economy on Tuesday, advisers said. They did not provide any details.
Late Sunday, after Mr. McCain and his team looked at a variety of policy options over the weekend, a campaign spokesman said Mr. McCain, who has been losing ground to Mr. Obama in the polls, would have no new proposals unless events warranted. Mr. McCain has been emphasizing his plan to help people with financial difficulties get more affordable mortgages, with taxpayers picking up the tab.
In his speech on Monday, Mr. Obama said: “I won’t pretend this will be easy. George Bush has dug a deep hole for us. It’s going to take a while for us to dig our way out. We’re going to have to set priorities as never before.”
The package of new proposals was the most detailed and ambitious offered by Mr. Obama since the financial crisis became acute last month, clouding the economic outlook and transforming the presidential campaign.
Despite criticism from the McCain camp that increasing taxes would further endanger the economy, Mr. Obama has “no plans to change” his longstanding proposal to repeal the Bush tax cuts next year for households with an annual income of more than $250,000, said Jason Furman, Mr. Obama’s economic adviser. Under Mr. Obama’s plan, most individuals and families would get a tax cut, and in terms of total dollars, he would cut taxes on lower- and middle-income people more than he would raise them on upper-income people.
McCain advisers on Monday reiterated their argument that the higher taxes, together with Mr. Obama’s plan for expanded health care, would hit small businesses with costs they could ill afford. Many small businesses pay taxes as individuals. But the Obama campaign and independent fact-checking groups argue that relatively few would be affected by the tax increase on upper-income levels.
The most costly of Mr. Obama’s new proposals is the one giving businesses a $3,000 income tax credit for each new full-time employee they hire above their current work force. The proposal, which would be effective for the next two years and is based on a concept that has been used in past downturns, would account for about $40 billion of the new package’s $60 billion price tag.
About $10 billion of the $60 billion would go to eliminating income taxes on unemployment benefits and extending aid to the long-term unemployed by 13 weeks, on top of the existing 26 weeks.
Mr. Obama’s proposal from last week to allow struggling small businesses to apply for loans from the Small Business Administration’s disaster funds would cost more than $5 billion. The expense of covering additional loan guarantees for the auto industry would mean more than $4 billion more.
While not costly to the Treasury, perhaps more controversial is Mr. Obama’s proposal to allow Americans to withdraw without tax penalty 15 percent of their retirement savings, up to $10,000, from their tax-favored Individual Retirement Accounts and 401(k)s. They would still have to pay income taxes on the withdrawal. Current law requires savers younger than 59 ½ to pay taxes and a 10 percent penalty.
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