President-elect Barack Obama yesterday (Monday) formally unveiled his economic team, including the nomination of New York Federal Reserve Bank President Timothy F. Geithner as the new administration’s U.S. Treasury secretary. The team’s first challenge will be assembling an economic stimulus package that could be even larger than the $700 billion Troubled Asset Relief Program (TARP) the Bush Administration has deployed.

The nomination of Geithner to succeed current U.S. Treasury Secretary Henry M. Paulson Jr. was leaked over the weekend, and was reported by Money Morning yesterday.

Geithner (pronounced: GITE-ner) obtained a Master of Arts degree in International Economics and East Asian Studies from Johns Hopkins University’s School of Advanced International Studies in 1985. He also has studied Japanese and Chinese and has lived in present-day Zimbabwe, India, Thailand and China.

As the nation’s top financial authority, Geithner will inherit oversight of the Bush administration’s $700 billion bailout for Wall Street and a U.S. economy struggling with recession.

He will be flanked by former Treasury chief Lawrence Summers, who will head Obama’s National Economic Council. Analysts say this appointment puts Summers in line to succeed Ben S. Bernanke as chairman of the U.S. Federal Reserve in 2010.

New Mexico Gov. Bill Richardson, who ran against Obama in the Democratic primary, will take over the Commerce Department, and Congressional Budget Office Director Peter Orszag will head the Office of Management and Budget.

In other key appointments, economist Christina Romer will be the director of his Council of Economic Advisors, which provides economic analysis and advice to the president, and Melody Barnes will be the director of his Domestic Policy Council (DPC). Before being tapped by Obama, Barnes was executive vice president for policy at the Center for American Progress.

“I’ve sought leaders who could offer both sound judgment and fresh thinking, both a depth of experience and a wealth of bold, new ideas, and most of all who share my fundamental belief that we cannot have a thriving Wall Street without a thriving Main Street,” Obama said at a press conference in Chicago.

Obama’s economic team will be faced with the grand task of restoring confidence to Americas stricken financial sector, and may have to wrestle the U.S. economy out of its worst downturn in decades. President-elect Obama made it clear that the first priority for he and his team will be to pass an economic stimulus package.

“The main thing right now is to get this economic recovery package on the road, to get money in the pockets of the middle class, to get these projects going, to get America working again,” David Axelrod, Obama’s chief campaign strategist, said in an interview with Fox News Sunday. “That’s where we’re going to be focused in January.”

Obama’s 2009 Stimulus

Obama and his aides remain vague on exactly what that package will look like. Over the weekend, however, the incoming president outlined a plan to create or save 2.5 million jobs by 2011.

“It will be a two-year, nationwide effort to jump-start job creation,” Obama said of the plan. “We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels.”

Tax cuts will also be a critical fixture in the stimulus. And they’d be preferable to rebates because they would have a more immediate impact on the economy. Of course, the question is who will receive those tax benefits.

Obama has repeatedly sounded calls for middle-class tax relief, but he also hinted that he might refrain from repealing tax cuts initiated by President George W. Bush that favored the wealthy – those who make more than $250,000 a year.

Other measures that Obama has proposed in the past include:

• Suspending penalties and income tax on early withdrawals from IRA and 401(k) accounts.
• Offering a temporary tax credit of $3,000 to companies for each new full-time employee hired in the United States.
• Extending unemployment benefits by a period of 13 weeks and temporarily suspending income taxes on those benefits.
• Requiring a 90-day moratorium on foreclosures for homeowners.

Clinton Stretch, a tax principal at accounting firm Deloitte & Touche LLP, told Bloomberg that two other Obama tax proposals could be good candidates for inclusion in a stimulus package.
The first is Obama’s “Make Work Pay” tax credit, which would provide a partial Social Security payroll tax holiday for most taxpayers, worth up to $500 for individuals and $1,000 for married couples.

The second would be an extension of the Earned Income Tax Credit, which favors low-income workers.

Of course, the pending stimulus package could include any of these measures, or none at all. The only certainty is that the stimulus will be costly. Sen. Charles Schumer, D-NY, said the amount set aside for a new stimulus package could equal or surpass the $700 billion designated for the TARP fund, more than half of which has been used to shore up U.S. banks and insurer American International Group Inc. (AIG).

Martin Baily, who was the White House’s chief economist under President Bill Clinton, told Bloomberg that the stimulus could exceed $1.2 trillion. That would dwarf the $175 billion package Obama proposed just one month ago, and even the $168 billion tax-break stimulus package President Bush issued earlier this year.

“We’re out with the dithering, we’re in with a bang,” Austan Goolsbee, a senior Obama economic adviser, said on CBS’ Meet the Press.

Source: Obama Unveils Economic Team, Plans 2009 Stimulus Package