The Obama middle-class rescue plan

While McCain dithers, Obama swoops in with a multi-pronged bailout for Main Street.

By Andrew Leonard
Published October 13, 2008 5:21PM (EDT)

Taking clear advantage of John McCain's inability to come up with new economic policy initiatives (something that was promised by the McCain campaign over the weekend but then backed away from), Barack Obama announced on Monday a sheaf of new initiatives aimed directly at Main Street. While it may be unwise to expect the Bush administration and an out-of-session lame-duck Congress to jump into action, the plan does offer useful hints as to what we could expect from an Obama White House in 2009. Politically, it appears astute.

The "Economic Rescue Plan for the Middle Class" includes tax credits for companies that create jobs in the United States, a 90-day moratorium on foreclosures, a lending facility for states and local governments, and, with a tip of the hat to McCain, penalty-free withdrawals from IRAs and 401Ks. As explained by Obama economic policy advisor Jason Furman on a conference call with reporters, the plan is designed to be acted upon immediately, although some elements would require Congress reconvening.

Other elements of the plan include suspending taxes on unemployment insurance and moving "aggressively" to help the auto industry.

On the conference call, Furman made an interesting comment responding to Fox News' Major Garrett, who had asked how much the package would cost. Short answer: $175 billion over two years -- a figure that would have seemed shocking six months ago, but now appears cheap compared to the price tag of bailing out the global banking system. But Furman also noted that the Obama camp had originally been counting on $50 billion of revenue from a windfall oil profits tax to partially offset the cost of its short-term middle-class rescue/economic stimulus package. The recent fall in the price of oil, however, had led the campaign to change its revenue assumptions. It was a small point, but revealing in the sense that it demonstrates the Obama campaign is paying realistic attention to current events. When you compare it, for example, to McCain's proposal of a government spending freeze in the middle of a recession, a maneuver many economists warn could easily deepen an economic downturn, the admission comes off as refreshingly pragmatic.

Some additional notes:

  • The lending facility for state and local governments is aimed at giving them the same kind of help dealing with short-term credit issues that corporations are getting from the Fed's decision to jump into the commercial paper market.
  • The 90-day moratorium on foreclosures would specifically apply to corporations wishing to take part in the Treasury's rescue plan for financial institutions eager to unload their toxic mortgage-backed securities on the government. If they want help, said Furman, they would have to agree to the moratorium.
  • Furman also made a point of stressing that Obama applauded Paulson's announcement on Friday that the Treasury would start buying stock in financial institutions, a move that, along with speedy global efforts to accelerate bank recapitalizations, has set off a robust stock market boom in the United States. (At 1 p.m. EDT the Dow was up nearly 600 points.) But so far, the McCain campaign has taken no position, pro or con on what is clearly one of the most radical and far-reaching economic policy actions in modern economic history.

Whether you agree with Obama's plan or not, it will certainly give him plenty of things to talk about during Wednesday's debate.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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