TOLEDO, Ohio (Reuters) - Democratic presidential nominee Barack Obama on Monday proposed tax credits and other steps to create jobs and to cushion Americans against the economic downturn but analysts described his ideas as modest.
The steps would cost $60 billion over two years and include penalty-free withdrawals from retirement accounts, temporarily barring banks from foreclosing on people trying to pay their mortgages and greater lending to states and municipalities.
The Illinois senator outlined his plan in Ohio, a battleground state that has suffered from the U.S. economic downturn and that is central to his campaign against Republican candidate Sen. John McCain of Arizona.
McCain’s campaign immediately dismissed Obama’s plan.
“The American people heard a series of new proposals from Barack Obama today, but what they did not hear was a promise to stop pursuing his massive tax increases,” said McCain spokesman Tucker Bounds, saying raising taxes would have a “devastating effect” given the turmoil in the U.S. financial markets.
Recent national opinion polls show Obama extending his lead over McCain, in some cases to double digits. In Ohio, however, polls show a statistical dead heat with Obama slightly ahead.
Analysts view voters’ anxieties about the global financial turmoil as one factor behind Obama’s rise in the polls just over three weeks before the Nov. 4 presidential election.
“It’s getting harder and harder to make the mortgage, or fill up your gas tank, or even keep the electricity on at the end of the month,” Obama told a crowd of about 3,000 people at Toledo’s SeaGate Convention Centre.
“At this rate, the question isn’t just ‘are you better off than you were four years ago?,’ it’s ‘are you better off than you were four weeks ago?”‘ he added.
Budget and economic analysts said Obama’s plans were modest in comparison to the scope of the global credit crisis.
Obama’s campaign estimated that his new proposals would cost an additional $60 billion to the federal treasury over two years. This is beyond the $115 billion estimated cost of a plan that Obama outlined this summer to jump-start the economy.
“It is not large enough to serve as a stimulus for the economy,” said Dean Baker of the Center for Economic and Policy Research. “Given what I expect to be the severity of the downturn, we’re probably going to want to see a lot more spending.”
Obama’s specific proposals include:
— A temporary $3,000 tax credit to companies for each new job created in the United States over the next two years.
— Penalty free withdrawals from 401(k) and IRA retirement accounts up to a maximum of $10,000 this year and next.
— A 90-day moratorium on foreclosures for homeowners who are living in their homes and making good-faith efforts to make their mortgage payments to banks that receive assistance under the $700 billion federal bailout plan.
— Calling on the Federal Reserve and Treasury to set up a facility to lend to state and municipal governments, similar to the steps the Fed recently took to provide liquidity to the commercial paper market.
The plan also calls for temporarily eliminating taxes on unemployment insurance benefits and having the Fed and Treasury prepare for guaranteeing a broader range of liabilities of the banking system.
After making his speech, Obama repaired to a resort on Lake Erie to get ready for Wednesday’s final debate against McCain. Asked how his preparations were going, he told reporters: “I’ve got a lot of work to day.”
Additional reporting by Deborah Charles and Andrew Quinn; Editing by David Wiessler