Breaking down Obama's bailout plan
U.S. President-elect Barack Obama
TEXT OF INTERVIEW
Steve Chiotakis: 2008 has been the year of the bailout. The banking industry, insurance, automakers. All in the name of not only saving those entities, but stimulating the economy. For his part, President-elect Barack Obama wants to have a stimulus package of his own in the coming weeks.
Marketplace's Nancy Marshall Genzer joins us with a preview of what Team Obama is working on to spur an economic recovery. Nancy, obviously this is a very complex recipe. What are some of the ingredients they're talking about?
Nancy Marshall Genzer: Well Steve, first you want to stir in a middle-class tax cut. We've heard from David Axelrod, who will be a senior advisor in the Obama White House, saying that the recession is not going to keep the new administration from giving the middle class a tax cut. Middle-class couples would get $1,000, individuals would get a $500 tax break. Obama also wants to create or save 3 million jobs, and he wants to do that in a way that would accomplish other goals, like rebuilding roads and bridges and energy and health care projects.
Chiotakis: So I guess a natural question, Nancy, is when is all of this going to come down?
Genzer: It's pretty much up in the air. Again, quoting Axelrod, he says a stimulus package would be nice by January 20, which of course is Inauguration Day, but he was non-committal after that.
Chiotakis: So this is gonna cost a lot of money, right?
Genzer: Yeah, the middle-class tax cut alone has been estimated at $140 billion from 2009 through 2010. Now Axelrod says the whole package would be in the neighborhood of $775 billion over those two years. However, one Princeton economist has said Obama is afraid of the "T" word -- T is, of course, standing for trillion. So stayed tuned on that one.
Chiotakis: I want to talk a little bit about this Wall Street bailout. Part one, of course, of the money, the $700 billion, was doled out under President Bush. What will we see different?
Genzer: Well, Obama might continue the current Treasury Secretary's focus on injecting bailout money into banks. But he also appears to be looking at ways to increase the value of those banks' troubled assets, like mortgage-backed securities. And one way to do that would be creating a market for them. Obama also wants to use more of the bailout money to actually help borrowers who are having trouble making their mortgage payments. Now there's another bailout we can talk about, that of course is the automakers' bailout that was approved by President Bush. An interesting cog in this wheel is that unions of course helped Obama and some congressional Democrats get elected, and they have said they don't want to bear most of the brunt of any reforms that are required as part of a bailout. And Obama himself has said it shouldn't just be the auto workers who bear the brunt of restructuring the industry.
Chiotakis: Marketplace's Nancy Marshall Genzer joining us from Washington. Happy new year, Nancy!
Genzer: Happy new year to you.