Obama team advised to spend over $600B on economy

WASHINGTON -- After consulting with economists from across the political spectrum, President-elect Barack Obama's advisers are contemplating an economic recovery plan that could cost as much as $1 trillion over two years.

The figure is far bigger than the $600 billion that Obama's team initially envisioned.

A number of economists, including former advisers to Republican presidential candidate John McCain, have suggested to Obama's team that the economy needs a much bigger cash infusion, possibly up to a $1 trillion over two years.

Obama's top economic advisers solicited the opinions as they worked to assemble a spending plan that would meet Obama's goal of saving or creating 2.5 million jobs over two years.

Obama advisers say his team has not settled on a figure. But the advice represents a far bigger sum than his advisers had considered. A huge stimulus package could run into Republican opposition in Congress.

Among those whose opinions Obama advisers sought were Lawrence B. Lindsey, a top economic adviser to President George W. Bush during his first term, and Harvard professor Martin Feldstein, an informal McCain adviser and former chairman of the Council of Economic Advisors under President Ronald Reagan.

Feldstein recommended a $400 billion investment in one year. Lindsey told Obama's team that a package should be in the range of $800 billion to $1 trillion. The advisers revealed the discussions on the condition of anonymity because no decisions had been reached.

The stimulus package would be in addition to the $700 billion Wall Street rescue fund already approved by Congress.

Obama's team has been spending the past several weeks reviewing economic data and consulting with experts to arrive at a dollar figure considered large enough to turn around the sinking economy. Many economists agree that an infusion of government spending is critical to get out of a recession.

Obama advisers say they agree with forecasts that predict that without a government infusion, unemployment will rise above 9 percent and not begin to come down until 2011.

Obama's economic team believes that to put unemployment on a downward trajectory with a goal of 7.5 percent or less over two years would require a stimulus package of about $850 billion.

A stimulus package that approaches $1 trillion, however, could run into significant Republican opposition in Congress. It also could cause heartburn for moderate and conservative Democratic lawmakers who loathe large budget deficits.

Obama has said he wants Congress to assemble a recovery package that includes massive spending on highway and bridge repairs and maintenance, new and upgraded schools, energy-efficient government buildings and a host of new environmentally friendly technologies.

This week, House Speaker Nancy Pelosi said Democrats are preparing a recovery bill in the range of $600 billion, blending immediate steps to counter the slumping economy with longer term federal spending that encompasses Obama's plan.

Meanwhile, Obama on Wednesday officially announced his choices to lead the agriculture and interior departments at a news conference in Chicago. Obama chose former Iowa Gov. Tom Vilsack for agriculture secretary and Sen. Ken Salazar to lead the Interior Department.

The agriculture department provides support for farmers and also ensures food safety, and the interior department oversees oil and gas drilling on public lands and manages the nation's parks and wildlife refuges.

The news conference was Obama's third in as many days to announce Cabinet appointments. Transition officials said more announcements were likely this week, before Obama planned to head to Hawaii for Christmas vacation with his family. Obama takes office Jan. 20.

Obama on Tuesday named Arne Duncan, the head of the Chicago school system, as education secretary. The posts yet to be filled include secretaries for the departments of Labor and Transportation. Nor has Obama named leaders for the intelligence agencies, or a trade representative.

Also at the news conference, Obama said questions about the scandal surrounding the governor of his home state Illinois will be answered by next week. Gov. Rod Blagojevich was arrested Dec. 9 on corruption charges, including an accusation that the governor was looking for bribes as he sought a successor for Obama's vacant Senate seat.

Obama said Wednesday that "it's a little bit frustrating" that he has not yet been able to release the results of an internal investigation into whether anyone on his staff had talks with the governor. He repeated that he has been asked by federal prosecutors not to release the report until they give the go-ahead.