May seek a stimulus plan exceeding $850 billion

Barack Obama may ask Congress next year to approve a stimulus plan of around $850 billion, an amount that has grown as the US economy sinks deeper into recession, an adviser to the president-elect said.

Obama’s transition team believes the amount, about 6 per cent of the US’s $14 trillion economy, is needed to reverse rising unemployment, said the adviser, who spoke on condition of anonymity. The sum would exceed initial estimates by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, as well as surpassing what some economists and the International Monetary Fund say is required.

The latest proposal is circulating in Congress as Obama’s advisers work with lawmakers to craft a package aimed at improving roads, bridges and other parts of the US’s crumbling infrastructure. The plan probably will also include state aid for unemployment and health-care programs and incentives such as tax credits to promote renewable energy production, lawmakers have said.

The president-elect wants to create as many as 2.5 million jobs over the next two years. As unemployment has increased, estimates of what is needed to pull the nation out of the slump have continued to grow, with some economists calling for a $1 trillion spending programme.

They include Kenneth Rogoff, a Harvard University professor who was an adviser to Republican presidential candidate John McCain, and Joseph Stiglitz, a Nobel Prize winner who served in President Bill Clinton’s White House.

UBS AG economists calculate a global stimulus of 1.5 per cent of gross domestic product has so far been lined up for next year. The IMF has called for packages of at least 2 per cent of GDP to stem the economic crisis that’s sweeping the globe.