Obama appeals to public over rescue plan

9 Feb 2009, 6:49 pm   -   Source: AAP
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US President Barack Obama is to take his case for a huge economic rescue plan directly to the US public, warning of a "catastrophe" without urgent action.

US President Barack Obama is to take his case for a huge economic rescue plan directly to the US public, warning of a "catastrophe" without urgent action, as a pivotal vote looms in the Senate.

Confronting the biggest challenge of his new presidency, Obama is returning to barnstorming campaign mode with a "town hall" meeting in rust-belt Indiana before his first White House news conference at the prime time of 8pm (1200 AEDT, Tuesday).

The president on Saturday welcomed signs of a tentative deal by lawmakers on his stimulus plan as the Senate held a rare weekend session, following news that the US economy shed a staggering 598,000 jobs in January.

"Because if we don't move swiftly to put this plan in motion, our economic crisis could become a national catastrophe," Obama said.

His Indiana visit, to be followed by a trip on Tuesday to Florida, underscored Obama's determination to drum up support in the country at large for a stimulus package that looks set to top $US800 billion ($A1.18 trillion).

The Democratic-led Senate was on Monday expected to decide on a key procedural motion to override Republican blocking tactics and put the package to a full vote, possibly on Tuesday.

The Democrats control 58 votes in the Senate and need 60 to break through a Republican blockade.

Despite the outlines of a compromise brokered with the help of the centrist Republicans, senior opposition senators were adamant that Obama's mix of infrastructure spending and tax cuts would prove a massive waste of money.

"We are going down a road to financial disaster. We'll pay dearly," Richard Shelby, the top Republican on the Senate's banking committee, told CNN on Sunday.

"Until we straighten out our banking system ... this economy is going to continue to tank," the Alabama senator added.

Administration officials said on Sunday that just such a program to revive the stricken banking industry, and the housing market, would be presented on Tuesday by Treasury Secretary Timothy Geithner.

The New York Times on Monday reported that the plan to save the foundering US banking system would rely on investors in hedge funds, private equity funds and other financial institutions buying the contaminated assets that wiped out the capital of many banks.

The daily, citing unnamed officials, reported that under the plan, the US government would guarantee a floor value for the assets as a way to overcome investors' reluctance to buy them.

Meanwhile, whatever bill emerges from the Senate will have to be reconciled with an $US820 billion ($A1.21 trillion) version passed already by the Democratic-led House of Representatives, which devoted more to infrastructure and less to tax cuts.

Summers said the two versions of the stimulus package overlapped by "90 per cent," and senior Democratic Senator Chuck Schumer predicted Congress would meet Obama's deadline of February 16 to have a bill ready for signature.

However, there could be ructions with the House leadership after Speaker Nancy Pelosi reportedly accused Republican senators of insisting on "very damaging" cuts to state education budgets from the planned stimulus.

Summers said those cuts in the compromise Senate bill, amounting to $US40 billion ($A59.17 billion), would be resisted by Obama.

"There's no question what we've got to do is go after support for education," he said on ABC television in the US.

"And there are huge problems facing state and local governments, and that could lead to a vicious cycle of layoffs, falling home values, lower property taxes, more layoffs.

"We've got to prevent that."

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