But in a concession to his need for bi-partisan support to pass any package, Obama promised “radical reforms” to impose more control over the federal budget in the future, The New York Times reported.

Republican leaders have already started voicing criticism of the recovery plan, offering their own ideas about what it should contain. Obama aides hope to soften the perception of the plan as an “open checkbook” by focusing more on tax cuts than on spending.

To firm up support among Congressional skeptics worried that Obama was too focused on government spending, Obama’s team revealed the package will devote about 40% to tax cuts, costing roughly $150 billion. The package will also include more than $100 billion in tax incentives for businesses to create jobs and invest in equipment or factories,

U.S. Sen. Mitch McConnell, R-KY, proposed that any money distributed to the states be provided as loans rather than outright grants.

“Nobody thinks we ought to be spending this money on things like mob museums and waterslides,” McConnell said on “This Week” on ABC. “And if the money were lent rather than just granted, states would I think spend it wisely, and the states that didn’t need it at all wouldn’t take any.”

Republicans were more likely to favor tax relief and tax credits as part of the economic measure, he said.

In a move to further assuage Republican fears about spending, Obama will use his public events this week to showcase his plans to put tight controls on the budget down the road.

Obama’s plans call for a new focus on controlling Pentagon contracting and aid to American corporations, among other areas. To insure a more efficient government, he will appoint a chief performance officer and a chief technology officer tomorrow (Wednesday), aides said.

But not matter what shape it takes, the package – dubbed the “American Recovery and Reinvestment Plan” – isn’t likely to land on Obama’s desk before mid-February. Obama had hoped to have Congress enact the recovery plan in time for him to sign when he takes office Jan. 20. But even his spokesman, Robert Gibbs, conceded Sunday night that this optimistic scenario was “very, very unlikely.”

“We don’t anticipate that Congress will have passed, both houses, an economic recovery agreement by the time the inauguration takes place,” Gibbs said.

But Obama’s team continued to press for swift action, saying the dismal state of the economy demands that Congress expedite the matter.

“There is no short run, other than keeping the economy from absolutely tanking. That’s the only short run,” Vice President-elect Joseph R. Biden Jr. said on “This Week.”

Added Biden: “We’ve got to begin to stem this bleeding here, and begin to stop the loss of jobs and [start] the creation of jobs.”

The Obama transition team is searching for the best way to get tax credits into Americans’ pockets quickly to help stimulate spending, but without using rebate checks like those that were issued last year as part of the Bush administrations stimulus package.

Instead, they are discussing a retroactive credit for the 2008 tax year and revised withholding formulas, meaning U.S. workers would see the actual benefits in their paychecks.

The package will likely include tax cuts of $500 to $1,000 for individuals and couples, as well as some $200 billion to help revenue-starved states pay for Medicaid programs for the poor. Major new spending would go to infrastructure projects – some on old-fashioned road-and-bridge repairs, and some going to Obama’s pet issue: Renewable energy.

In a related development yesterday, the dollar rose to a three-week high against the euro and rose versus the yen on speculation the fiscal stimulus will help the U.S. economy recover from recession sooner than others, according to Bloomberg News.

“I do expect the euro-dollar to fall further,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA (OTC ADR: BNPQY) in New York. “It’s really a question of where you will get most of the return for your money. It does seem that we’ll see stabilization in the economic downturn first in the U.S.”

Source: Obama’s Stimulus Plan Backed by Promises of Fiscal Restraint & Tax Cuts

Item: The bailout of Detroit went down in flames last night, but not because principled lawmakers devoted to the free market thought that management of the automakers should pass from weak hands into stronger hands via bankruptcy, as the Framers of the Constitution provided for.

No, it appears the Republican holdouts were more than happy to fork over the $14 billion, but only if the United Auto Workers agreed to wage cuts on the GOP’s timetable. In other words, the modern Republican party believes it’s government’s place to micromanage wages. (And let the record show the instigator of this scheme, Senate Minority Leader Mitch McConnell, was all for the bailout of the financial sector that Jim Rogers has declared bankrupt.)

Item: Laid-off workers at a company smash windows and computer gear. Workers at another company travel hundreds of miles to company headquarters to demand back wages. Taxi drivers fight with police in several cities, and even the cops gather as mobs to demand higher wages.

United States 2010? No, China 2008.

Item: Congresscritter submits a bill demanding the Fed, among other things, restore the M3 money supply figure it stopped reporting nearly three years ago. The congresscritter is… Dennis Kucinich?

OK, here’s something I can actually wrap my head around. The Federal Reserve just gave Bloomberg a big ol’ middle finger in response to Bloomberg’s Freedom of Information suit demanding to know who’s getting those $2 trillion in emergency loans, and what they’re putting up for collateral.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

Incredibly, this longish story never gets around to saying what the next step in the legal process is. So yes, I guess my mind boggles at that too.

Source: The Mind Boggles…

The bill clearly falls short of the $34 billion the Big Three were asking for, but should be enough to keep the automakers running through January, when the new Congress and Obama administration take the wheel.

As previously reported in Money Morning, there will be limits on executive pay, prohibitions for golden parachutes and requirements that the automakers get rid of their corporate aircraft and not pay dividends while loans are outstanding. The bill also provides a “car czar,” or presidential appointee, to oversee keep tabs on the companies’ restructuring efforts.

Of course, the bill is still awaiting congressional approval and there is cause to believe it may stall in the Senate.

Sen. Richard Shelby, R-AL, was a member of the panel that twice grilled Big Three CEOs and one of the bailout’s most vocal critics. Yesterday (Wednesday), Shelby threatened to filibuster the deal if it reaches the Senate.

It’s interesting to note that Shelby’s home state of Alabama, has built three foreign car assembly plants – Honda Motor Corp. (ADR:HMC), Mercedes-Benz and Hyundai – as well as a Toyota Motor Corp. (ADR:TM) engine plant, in the past 20 years.

Shelby’s efforts induced the formation of Boycott Alabama Now, a group that says it wants America to give Shelby a taste of what he’s doing to America. Such a boycott “will include any travel into the state well as boycotting the purchase of anything produced in any way within the state,” according to the group’s Web site.

Senate Minority Leader Mitch McConnell expressed reservations about the bill’s legislation and doubts it’ll garner enough Senate votes to pass. The state he represents, Kentucky, has a 7,000 employee Toyota plant, The Boston Globe reported.

Then there’s Tennessee, the only state with U.S., Asian, and European auto assembly plants. And in an interview with BusinessWeek, Tennessee’s Sen. Bob Corker seems to understand his colleague Shelby’s positions on the bailout more so than his own.

“It has not been an issue of local politics. For me there is no issue of local politics. I try and dig into these issues and present thoughtful responses to the situation. In defense of Senator Shelby, I knew where he was going to be on this issue before this ever arose,” Corker said. “He was against the Chrysler loans back in 1979. He was always going to be against this, as he was against the Wall Street bailout legislation. In his case, it’s not the politics of the auto industry. That’s just who he is.”

But Corker nailed the source of problem.

“Regardless of what happens this week, the legislation, if passed, is not going to move people to buy cars,” Corker said.

Auto Woes Extend Beyond the Big Three

Falling demand is something all carmakers can agree on, especially in Germany, Europe’s largest economy and the home of Europe’s largest carmaker, Volkswagen.

While all focus has been on Detroit’s Big Three, few have noticed that Volkswagen – like Detroit’s Big Three – is trying to bite off its own piece of a broad government bailout. In October, Germany’s parliament passed a $642 billion (500 billion euro) bank-rescue plan to stabilize the country’s banks. And Volkswagen has quietly sought government help for its financial services and banking units.

Premium carmaker BMW said it wasn’t sure if it would ask for similar help, Reuters reported.

That’s why it’s not accurate to assume bailout opponents share the same opinions on the bailout as foreign automakers. As Money Morning previously reported, it’s more than just Big Three employees on the line.

While the Big Three employ more than 200,000 people directly, they support millions more indirectly through suppliers and dealerships. The collapse of the Big Three could ultimately cost the economy more than 2 million jobs total. And that doesn’t count the estimated 1 million Americans – including many retired autoworkers – who rely on the U.S. auto companies for pension and healthcare benefits.

According to Germany’s VDA industry group, parts purchased by manufacturers account for 75% of the value of an average car, Bloomberg reported.

Here in the United States, as many as 60% of Honda’s U.S. parts suppliers are also major parts sources for the Big Three.

If a manufacturer’s major customer goes under, it too may scale back operations and therefore be unable to meet the manufacturing and shipping demands of another customer.

“You can’t underestimate what would happen when a large player collapses,” BMW Chief Executive Officer Norbert Reithofer e-mailed to Bloomberg. “That would impact the supplier structure and therefore the entire industry.”

The United States is also the largest market for most foreign automakers. Allowing one or all of the Big Three to go under would add millions to the running unemployment numbers and deepen the recession, making the U.S. market less likely to buy their cars.

Source: Auto Bailout Awaits Congressional Approval with Millions of Jobs at Stake