Obama tries to allay concerns over stimulus package

By Caren Bohan and Jeremy Pelofsky

WASHINGTON (Reuters) - President-elect Barack Obama, said on Friday that the latest grim unemployment report added urgency to the need to pass his $800 billion stimulus proposal, even as his efforts ran into difficulties in the U.S. Congress.

Obama's top aides visited Capitol Hill to allay lawmakers' concerns about his proposal, which would combine tax cuts, aid to states and public works projects. The measure is aimed at lifting the economy out of a recession that has already lasted a year.

"Our expectation is that we will continue to hone and refine our package over the next several weeks," Obama told a news conference, noting that the effort to craft the stimulus package would be a collaboration with Congress.

Several Senate Democrats have raised questions about whether some of the tax cuts for individuals and businesses would have the desired impact and have called for more energy tax breaks.

New York Sen. Charles Schumer played down those differences, saying there was an awareness that time was of the essence in passing the bill.

"While it's certainly true that we in Congress will have input, and we certainly provided some suggestions and comments in that meeting yesterday, the urgency of this economic crisis is going to limit any haggling over competing approaches," Schumer said.

The Labor Department reported earlier on Friday that U.S. employers slashed more than half a million jobs from their payrolls in December, pushing the unemployment rate to 7.2 percent from 6.8 percent in November.

It was the highest jobless rate in nearly 16 years and the report said the ailing economy hemorrhaged 2.6 million jobs for all of 2008, the most since 1945.

'STARK REMINDER'

Obama called the jobs report a "stark reminder" that the government needed to act. "Clearly the situation is dire. It is deteriorating and it demands urgent and immediate action," he said.

There is broad consensus among Democrats and Republicans that bold steps are needed to address the economy's woes. Obama is also benefiting from a reservoir of goodwill as he prepares to take office on January 20 with high public approval ratings.

Still, signs are emerging that his goal of securing package of the measure by mid-February will prove challenging.

In addition to some of the questions about the structure of the tax cuts, a report from the Congressional Budget Office has added to nervousness about the impact of the stimulus on already skyrocketing budget deficits.

The CBO this week forecast a $1.2 trillion deficit for this year, even before factoring in the stimulus.

Clearly aware of the need to use the bully pulpit to press for passage of the stimulus, Obama warned in a speech on Thursday that the U.S. recession could linger for years in the absence of aggressive steps to jump start growth.