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Page last updated at 12:03 GMT, Friday, 9 January 2009

Democrats attack Obama on economy

A job centre in New York in the US
Mr Obama hopes his stimulus plan will create jobs

US President-elect Barack Obama's $800bn (526bn) economic stimulus plan has run into opposition in Congress from within his own party.

Mr Obama, who takes office in two weeks, wants to cut taxes and create jobs through increased government spending on public works projects.

However, senior Democratic senators have expressed scepticism that tax cuts will lead to growth and job creation.

They want more money spent on infrastructure and energy projects.

Mr Obama's economic advisor Lawrence Summers and political aide David Axelrod met with Democratic senators on Thursday, after Mr Obama laid out the broad principles of his plans.

Mr Obama said his plan would create 3 million jobs by 2011 - US job losses for 2008 are expected to reach 2.5 million when the December figure is released on Friday.

The president-elect is piling on the pressure for action, says the BBC's Adam Brookes in Washington.

'Marginal effectiveness'

However, Democratic Senator Kent Conrad, chairman of the Senate Budget Committee, questioned the idea of giving individual taxpayers and couples a rebate of $500-$1,000, a move designed to encourage consumer spending.

"These marginal incentives are of marginal effectiveness," Mr Conrad said after the meeting.

"When people are afraid they are going to lose their jobs, if they get another $20 a week they don't spend it, they save it," he added.

KEY ELEMENTS OF STIMULUS PLAN
Barack Obama answers questions from the press on 5 January
Immediate tax cuts of $1,000 per family
Increased benefits and health care for the unemployed
Computerising all health care records in five years
Doubling investment in alternative energy and re-shaping energy grid
Aid to states to help maintain vital services

"For example, a jobs credit - that seems improbable to me that if you give jobs credit to businesses in this economic environment, that they're going to hire people to build things that can't sell," he added.

Democratic Senator John Kerry criticised proposals to give businesses a $3,000 tax credit for each new employee they hire.

"I'd rather spend the money on the infrastructure, on direct investment, on energy conversion, on other kinds of things that much more directly, much more rapidly and much more certainly create a real job," he said.

Senator Tom Harkin, an Iowa Democrat, also expressed scepticism that the plan would be effective.

"To me it still looks a little bit like... if we just put it in the top, it's going to trickle down," he said.

Republicans have welcomed the tax cut element of the package, but have raised doubts about its impact on the budget deficit, which new figures show will reach $1.2 trillion in 2009.

"Our economy needs help, but at the end of the day how much debt are we going to pile on future generations?" said John Boehner, the Republican leader in the House of Representatives.

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