Obama will stick to promise to cut taxes, his aides say

WASHINGTON —  President-elect Barack Obama’s top advisors said Sunday that they wouldn’t back away from a promise to cut taxes on the middle class and raise them for the wealthiest Americans, as they made the case for a massive new stimulus package geared toward reviving the slumping economy.

Speaking on Sunday talk shows and in a newspaper opinion piece, Obama aides stepped up a drive to build a broad political consensus behind Obama’s core economic proposals: a two-year spending package that could exceed $775 billion, coupled with tax policies weighted in favor of the middle class.

Appearing on NBC’s “Meet the Press,” David Axelrod, a senior advisor to Obama, said, “We have to act. Every economist from left to right agrees that we have to do something big in terms of job creation, but we want to do it in a way that will leave a lasting footprint.”

Obama wants lawmakers to give him a stimulus bill to sign soon after he is sworn in Jan. 20.

Writing Sunday in the Washington Post, Lawrence H. Summers, Obama’s incoming director of the White House National Economic Council, said the bleak economic climate called for substantial new spending.

“Economic forecasts have been revised significantly downward over the past several months; today, many experts believe that unemployment could reach 10% by the end of next year,” Summers wrote. As of November, unemployment stood at 6.7%.

Summers added: “In this crisis, doing too little poses a greater threat than doing too much.”

Since his Nov. 4 victory, Obama has been confronted with signs that the economy is worsening: rising unemployment, sinking home values and a contracting gross domestic product. Last week there were reports of a dismal holiday shopping season. Retail sales dropped 5.5% in November and 8% in December through Christmas Eve, compared with a year earlier.

Though he called for a more modest stimulus during the campaign, Obama is now raising the ante. He wants to buoy the economy through hundreds of billions in new spending that also would be a step toward the broader economic transformation that he outlined as a candidate.

The money would go toward classrooms, libraries and labs meant to help students compete in a modern global economy; repairing aging bridges, roads and public transit systems; the computerization of healthcare records; and investments in energy sources to curb U.S. dependence on foreign oil.

“These are things that will put people to work but also that will strengthen our economy in the long run, and that’s where we’re focusing our attention,” Axelrod said.

With the nation facing a $1-trillion deficit and a rising jobless rate, some economic experts have suggested that Obama rework his tax plans. Their argument is that now is an inopportune time to lower middle-class taxes or to raise taxes on people earning more than $250,000 a year.

Axelrod said the president-elect wouldn’t budge.

“Look, we feel it’s important that middle-class people get some relief now,” Axelrod said. “He’s promised a middle-class tax cut. This package will include a portion of that tax cut that will become part of the permanent tax cut he’ll have in his upcoming budget.”

Of Obama’s promise to raise taxes on wealthy households, Axelrod said, “the question is on the Bush tax cuts for the very wealthiest Americans and it’s something that we plainly can’t afford moving forward. And whether it expires or whether we repeal it a little bit early we’ll determine later, but it’s going to go. It has to go.”

Republicans seem resigned to passing a major stimulus package, but party leaders are calling for certain conditions. They want ample public debate on the bill and assurances that it is stripped of pork-barrel projects.

Sen. Bob Corker (R-Tenn.) said in an interview Sunday that he expected the stimulus would pass.

“Regardless of whether I support it or not, a stimulus package is coming,” Corker said. “There’s too much momentum right now to envision that something isn’t going to happen. We can only hope that whatever does happen is something that advances the country’s interests.”

He added: “The issue we have to solve is the credit issue -- the problems in accessing credit. That to me is 90% of what we need to be focused on.”

Axelrod also was asked about a matter that Obama aides would like to put behind them: the investigation into Illinois Gov. Rod R. Blagojevich’s alleged attempt to auction off Obama’s Senate seat to the highest bidder.

Last week, the transition team released an internal report laying out contacts between the incoming White House chief of staff, Rahm Emanuel, and the Democratic governor’s office.

The five-page report, based on interviews by Obama’s designated White House counsel, Greg Craig, concluded that Obama did not talk to Blagojevich’s office about the Senate seat and that transition aides had not taken part in any “inappropriate discussions” with the governor’s office.

“Meet the Press” host David Gregory asked Axelrod whether the transition team, which has promised to be open and transparent, would release transcripts of Craig’s interviews or any notes taken during the internal review.

“There’s nothing more, really, to release,” Axelrod said. “The story is reflected in that, in that narrative, and I think events moving forward will support that.”

Axelrod said the five-page report was “reviewed” by U.S. Atty. Patrick J. Fitzgerald’s office, which is leading the Blagojevich probe.

In a brief interview Sunday, a spokesman for Fitzgerald’s office declined to comment on whether the prosecutor’s office had reviewed the Obama team’s report.

--

peter.nicholas@latimes.com