Pelosi warns stimulus must pass by mid-February

WASHINGTON (Reuters) - Congress must approve a sweeping economic stimulus package by mid-February or the United States will face a deepening crisis and more job losses, House Speaker Nancy Pelosi said on Wednesday.

Democrats wanted to present President-elect Barack Obama with a plan on January 20, his first day in office, but the target has slipped with political realities taking hold.

At a Democratic-sponsored forum on suggestions for a recovery plan, Pelosi said lawmakers must ensure any response has a rapid and meaningful impact on the reeling economy.

"Failure to act quickly will only lead to more job losses and more economic pain for America," Pelosi said.

She did not discuss a figure, but Democrats have talked about spending roughly $775 billion over two years. The focus would be on public works projects, aid to cash-starved state governments and more help to the poor and unemployed who have been hit hard by the year-long recession.

Obama plans to propose $310 billion in tax cuts for the middle class and businesses as part of the package.

Some governors and economists are pushing for a larger plan of around $1 trillion, while many Republicans want a more modest bill, possibly in the range of $500 billion.

Obama has been framing a package around discussions with congressional leaders, including Republicans.

"We expect that it will be on the high end of our estimates, but will not be as high as some economists have recommended because of the constraints and concerns we have about the existing deficit," Obama told a news conference.

TAX CUTS VS SPENDING

Sen. Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee, told reporters that he would support a larger stimulus if certain measures were included.

Gregg expressed concern about the potential influence of special interests and conservatives generally favor a stimulus heavier on tax cuts than spending.

Few details about the plan have trickled out since Congress returned to Washington this week, but Pelosi made it clear that it will be sweeping and innovative.

"This is not your grandfather's public works bill," Pelosi said, referring to the brick-and-mortar job creation programs during the Great Depression of the 1930s.

Minnesota Rep. James Oberstar, the Democratic chairman of the Transportation Committee, has said classic public works infrastructure spending could total $85 billion. That would include $32 billion for highways and bridges.

The U.S. Chamber of Commerce said rebate checks, corporate tax breaks, and plans to stem home foreclosures should be included.

Technology companies are pressing to spur investment in expanding high-speed Internet. Businesses are lobbying for tax breaks and bankers want changes to tax exempt bond regulations to help state and local governments issue debt.

Senate Finance Committee Chairman Max Baucus said his fellow Democrats generally agree on a plan, but are mulling more energy tax incentives. Obama has said environmental initiatives will be a key component to the package.

GOING GREEN

One economist's model at the forum assumed $74 billion in "green" infrastructure initiatives, like alternative energy.

"Green jobs are labor intensive. They put people to work here in America -- you can't outsource installation of a solar roof on your house to another country," Sen. Barbara Boxer, a California Democrat, told a hearing of the Environment and Public Works Committee, which she chairs.

Former Labor Secretary Robert Reich, an Obama transition adviser, said the United States would lose another 3 million jobs this year if a stimulus package is not approved soon.

"Unemployment will rise to 10 percent of the work force by the end of this year," said Reich, who served under former President Bill Clinton, if the government drags its feet.

The U.S. Bureau of Labor Statistics will release its December jobs report on Friday and economists expect the unemployment rate to rise to 7.0 percent from 6.7 percent in November, which was the highest since 1993.

U.S. private employers shed 693,000 jobs in December, up sharply from November and far more than economists estimated, a report by ADP Employer Services said on Wednesday.

The U.S. has lost some 2 million jobs during the recession, which was brought on by the credit and housing crisis.

Mark Zandi, chief economist at Moody's Economy.com, told lawmakers that the "financial system is broken," and he supports a stimulus bill of $750 billion to $800 billion.

"The Federal Reserve is just not up to the task of getting the economy going," said Zandi, who added the economy "will struggle for some time to come."

Reich, who recommended a stimulus of at least $900 billion, said Congress should not be wary of borrowing to pay for it. He pointed out that U.S. debt at the end of the World War Two was more than 100 percent of gross domestic product.

U.S. public debt is currently around 40 percent of GDP.

The U.S. budget deficit will swell to a record $1.186 trillion in fiscal 2009, congressional forecasters said.

(Additional reporting by Julie Vorman, Burton Frierson, Kevin Drawbaugh, Richard Cowan, Jeremy Pelofsky, and Karey Wutkowski; editing by Gary Crosse)