WASHINGTON — Hillary Clinton unveiled a $70 billion economic stimulus plan Friday, but she offered no way to pay for the proposal, and her call for a freeze on certain mortgages was of questionable legality.
The New York senator was aiming to lead the way on what's become the 2008 presidential campaign's most prominent — and most vexing — issue: how to improve the sagging economy.
The topic was prominent at Thursday night's Republican debate in South Carolina, and Clinton used it Friday to build momentum after her Tuesday win in the New Hampshire primary.
She announced the proposal not in one of the upcoming primary or caucus states of South Carolina or Nevada, but at a union hall in the Los Angeles area. California is the center of the nation's housing crisis, with many parts of the state reporting some of the highest foreclosure rates in the nation.
California holds its nominating contest on Feb. 5, along with 23 other states and American Samoa. California's total of 441 Democratic delegates is about 22 percent of the total needed to win the Democratic nomination.
"The economic issue has spread across the country, and at the end of the day, California is the big prize," said Kareem Crayton, a professor of law and politics at the University of Southern California.
That's particularly true because two of the other big prizes that day — New York and Illinois — are the home states of Clinton and Sen. Barack Obama, respectively, and therefore are expected to deliver sizable numbers of delegates to each.
Clinton chose her timing well, Crayton said.
"It plays into what she has argued for years is a core concern of people, and it helps her where she has run strongest, among working-class, blue-collar people," he said.
"Economists and politicians are finally waking up to what many of America's families already know — that we might be sliding into a recession," Clinton said.
She maintained that her stimulus plan — similar to what President Bush and Congress are mulling — would "jump-start the economy without negatively affecting America's long-term fiscal position."
But Clinton offered no way to pay the roughly $70 million that her stimulus plan could cost.
"It would be a one-shot (infusion), and she is very committed to fiscal discipline," Gary Gensler, a Clinton economic adviser, said Friday on the CNBC cable channel, confirming that she wouldn't propose any spending cuts to pay for her plan.
The Clinton campaign didn't answer requests for comment.
Clinton's plan echoed some ideas now before Congress, such as allowing quasi-government entities such as the mortgage agencies Fannie Mae and Freddie Mac to purchase larger loans in high-cost areas. Her pledge to expand emergency energy assistance mirrors an annual fight among lawmakers about expanding funding to states under the Low Income Home Energy Assistance Program.
Clinton also called for an automatic rate freeze of at least five years for adjustable-rate mortgages given to subprime borrowers with the weakest credit. Her plan gives the impression that mortgage lenders would be forced to freeze loans, when in fact she's only suggesting that they should.
Treasury Secretary Henry Paulson late last year brokered a deal with the largest subprime lenders to delay increases in adjustable rates for troubled homeowners. But he didn't mandate a freeze, fearing that would set a bad precedent of government interfering in private contracts reached among lenders, borrowers and investors in mortgage bonds.
"The secretary has said many times that we need to work within the flexibility in current contracts. We do not want to do something for short-term gain that could severely impact the flow of capital to mortgage finance going forward," said Michelle Davis, Paulson's spokeswoman.
The American Securitization Forum, which represents the issuers of mortgage bonds that would be affected by any rate freeze, warned against government intervention in private contracts.
"Consistent with our previous comments, we continue to believe that categorical modifications of mortgage loan interest rates will harm rather than help all mortgage borrowers," said George Miller, the forum's executive director.
Clinton's proposal echoes what her husband tried to do in 1993, when his economic advisers — many of whom are now advising his wife — proposed a $16.3 billion package to boost unemployment benefits, spend on infrastructure and create public-sector jobs.
But with the economy recovering, Congress approved only $4 billion in jobless aid.
Obama had little reaction to Clinton's proposal Friday. The highlight of his day was receiving the endorsements of Arizona Gov. Janet Napolitano, a popular figure in another Feb. 5 voting state, and 1984 and 1988 presidential candidate Gary Hart.
Republicans took their fight to Michigan, where voters go to the polls Tuesday. Former Massachusetts Gov. Mitt Romney continued to criticize Arizona Sen. John McCain for saying that some jobs have simply been lost and will never return.
"I'm not going to throw in the towel on any jobs in Michigan. ... Frankly, if we can't solve the problems in Michigan and bring Michigan back, what we see there is going to spread to other parts of the entire country, and we'll find ourselves playing second fiddle to China. That's unacceptable," Romney told MSNBC's "Morning Joe" program.
McCain instead focused his Michigan pitch on a new ad reminding voters he's a "straight shooter."