Obama Proposing Tax Cut Of $1,000 for Most Families

President-elect Barack Obama, warning of dire consequences if Congress doesn't pass his economic stimulus plan, said he would offer working families a $1,000 tax cut and improve energy efficiency in millions of American homes in order to create jobs and stimulate the economy.

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"To get people spending again, 95 percent of working families will receive a $1,000 tax cut— the first stage of a middle-class tax cut that I promised during the campaign and will include in our next budget," he said in a speech outside Washington.

He said his economic recovery plan would extend jobless aid and healthcare coverage for the unemployed and include proposals to double production of alternative energy in the next three years and improve energy efficiency for millions of homes.

"In short, a bad situation could become dramatically worse" if Washington doesn't go far enough to address the spreading crisis, Obama said as fresh economic reports showed an outlook growing increasingly grim.

Since his November election, he has deferred to President Bush on foreign policy matters such as the Middle East.

Video: President-elect Obama lays out his economic plan.

But, with the urgency of the economic crisis, Obama has waded deeply into domestic issues as he works to generate support for his plan to create jobs, jolt the economy and make long-term investments in other areas.

In his speech at George Mason University, Obama cast blame on "an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington."

But he added, "The very fact that this crisis is largely of our own making means that it is not beyond our ability to solve.

Our problems are rooted in past mistakes, not our capacity for future greatness." Obama laid out goals of doubling the production of alternative energy over three years, updating most federal buildings to improve energy efficiency, making medical records electronic, expanding broadband networks and updating schools and universities.

Still, his remarks shed little new light on the details of his plan that could cost as much as $775 billion over two years in tax cuts and spending intended to jolt the economy and create new jobs.

The speech marked Obama's highest-profile effort yet on an issue certain to define and dominate his early presidency.

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," he said.

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Governors of six states and mayors of 14 cities—a bipartisan audience that came from as far away as Minnesota and Utah to be among the few hundred in attendance—listened to the speech that lasted less than a half hour.

Obama asked Congress to work day, night and on weekends if necessary to pass a revival plan within the next few weeks so that it can be ready for his signature shortly after he takes office on Jan. 20.

A report that came out the same day as Obama's speech showed that the number of people continuing to draw jobless benefits unexpectedly rose sharply to the highest level since November 1982, demonstrating the troubles the unemployed are having in finding new jobs.

And unemployment figures due out Friday are expected to show that the U.S. lost a net total of 500,000 jobs in December.

If accurate, that would bring 2008's total job losses to 2.4 million, the first annual job loss since 2001 and the highest since 1945, though the number of jobs has more than tripled since then.

Speaking a day after the release of a stunning new estimate—that the federal budget deficit will reach an unprecedented $1.2 trillion this year, nearly three times last year's record— Obama acknowledged some sympathy with those who "might be skeptical" of the stimulus.

Vast sums already have been spent or committed by Washington in an attempt—largely unsuccessful so far—to get credit, the lifeblood of the American economy, flowing freely once again.

Such statements are coded to appeal to budget hawks in both parties, whom Obama wants to win over so that approval of a package draws wide, bipartisan support in the Democratic-led Congress.

To answer their concerns, he promised to allow funding only for what works. He also pledged a new level of transparency about where the money is going.

A day earlier, he promised to tackle the out-of-control fiscal problem posed by Social Security and Medicare entitlement programs and named a special watchdog to clamp down on all federal programs.

Obama made broader arguments, too, saying that the private sector, typically the answer, cannot do what is needed now.

"At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe," he said.

Obama's transition team and Democratic congressional leaders are working daily to hammer out the still-evolving package, expected to total nearly $800 billion.

The initial hope had been to have a new stimulus package approved by Congress in time for Obama to sign it upon taking office on Jan. 20. That timeline has slipped considerably, into at least mid-February if not later.

The package is expected to include tax cuts for businesses and middle-class workers, money to help cash-starved states with Medicaid programs and other operating costs, and a huge share for infrastructure building, investments in energy efficiency and a rebuilding of the information technology system for health care.

Much of the latter portions of the plan are aimed at what Obama likes to talk about as the need for "reinvestment" and not just "recovery."

Obama also promised action to address the economy's ills beyond the package, such as tackling the massive wave of home foreclosures many experts expect, preventing the failure of financial institutions, rewriting financial regulations and keeping accountable the "Wall Street wrongdoers" who engage in risky investing.

—Reuters and AP contributed to this report

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