Obama concedes that bailout costs may force him to adjust plans

McClatchy NewspapersSeptember 23, 2008 

WASHINGTON — Barack Obama said Tuesday that the huge costs of a financial bailout meant that he probably wouldn't be able to deliver everything he was promising in his campaign, at least not as quickly as he'd hoped.

"Does that mean that I can do everything that I've called for in this campaign right away? Probably not. I think we're going to have to phase it in. And a lot of it's going to depend on what our tax revenues look like," Obama said on NBC.

The Democrat didn't identify which proposals he might delay if the government spends up to $700 billion to shore up the country's financial system, as the Bush administration has proposed. Congress is negotiating the terms of the bailout this week in hopes of completing action by the weekend.

Among Obama's proposals that would add to the federal budget deficit and presumably could be delayed are tax cuts for those who make less than $200,000 a year, an expansion of health care to cover the uninsured and increased spending on the nation's infrastructure, energy and education.

He said much depended on how much the government would spend on the bailout the first year, and whether those costs were counted as part of the annual budget.

Later in the day in Florida, Obama said he wouldn't delay his tax-cut plan if he were elected president.

"When it comes to middle-class tax cuts that I've called for, that is something that is absolutely necessary to strengthen an economy that is sliding, probably, into a deeper recession," he said. "We're going to have to make sure that ordinary folks have money in their pockets, that they are able to pay gas and food costs, that retail sales are bolstered. I think that . . . the middle-class tax cut that I've talked about . . . is something that still makes sense in this kind of environment."

Depending on how the bailout works, the government could sell the bad loans it buys from banks and gradually recoup some or all of the money it spent acquiring them. That would ease pressure on the federal budget, which already is projected to be more than $400 billion in the red next year — before the bailout.

"Although we are potentially providing $700 billion in available money to the Treasury, we don't anticipate that all that money gets spent right away and we don't anticipate that all that money is lost," Obama said. "How we're going to structure that in budget terms, it still has to be decided."

Republican John McCain hasn't said whether he might have to change his plans because of the bailout costs. His proposals, which include making expiring tax cuts permanent, also are projected to swell federal budget deficits even before the bailout costs are counted.

McCain's campaign didn't respond to inquiries about whether he's weighing any change in those plans in light of the shifting economic landscape.

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