Obama: Economy will get worse before it improves

The recession which has battered the US economy for the past six months will get worse before things improve, Barack Obama warned yesterday as it became clear that the country is moving into its deepest and longest economic downturn since the Second World War.

Mr Obama outlined an audacious plan to jump-start the economy by spending an estimated $600bn (£400bn) rebuilding the nation's crumbling infrastructure. He said he intends to spend on a scale not seen since the interstate highway system was built 50 years ago. "We've got to provide a blood infusion right now, make sure that the patient is stabilised," Mr Obama told NBC's Meet the Press.

Thanks to a vicious circle of mounting job losses – 1.91 million have been thrown out of work this year – and loss of consumer confidence, the US economy is rapidly freezing over. Mr Obama's plans to reboot the economy go beyond infrastructure to include tax cuts and lifelines to state governments, some of which are edging towards bankruptcy. The aim, the President-elect said, was to fight the recession by creating millions of new jobs in a more sustainable, less energy- dependent economy.

Mr Obama plans to spend his way out of recession by patching up the nation's elderly network of roads, bridges and crumbling public buildings, once he takes over on 20 January. His first priority would be getting money as quickly as possible to what he described as "shovel-ready projects" around the country, mostly bridge and road works.

He also intends to spend heavily on revamping public buildings such as schools and hospitals which waste energy. There are also plans to create a "smart electric grid" that will tap into the country's vast potential to generate wind energy and transport it to the big centres of population. "We've got to get the economy moving," Mr Obama said and the government would get "the most bang for the buck" by "investing in the largest infrastructure programs," such as roads and bridges that are already waiting funding.

Such spending would not only be "an immediate stimulus," he said, "because I think we can get a lot of work done fast," but the projects would be "down payments on the kind of long-term sustainable growth that we need."

Economists are growing more pessimistic about the downturn. "We are falling off a cliff" said former labour secretary Robert Reich, raising the question of "whether the meltdown we're experiencing should be called a depression".

A significant percentage of Americans are now jobless or underemployed, Mr Reich said, "far higher than the official rate of 6.7 per cent." But that is not as bad as in 1933, when one out of four American workers was jobless. "We're not there yet, but we're trending in that direction," he said.

Mr Obama is about to inherit a government deficit estimated at $1 trillion, and an economy that is rapidly hurtling out of control. "If you look at the unemployment numbers, the fragility of the financial system and the fact that it's an international system," the recession "is a big problem, and it's going to get worse," he said.

Of immediate concern are the country's three big car manufacturers, which face bankruptcy causing the loss of millions more jobs unless they, like the banks, get a government bailout.

But Mr Obama had uncharacteristically harsh words for highly paid leaders of the industry, declaring: "If they want to survive, then they'd better start building a fuel-efficient car," and accept that the future will never again be as "rosy as they project".

He went on to say that because "the auto industry is the backbone of American manufacturing," employing millions across many states, "I don't think it's an option to allow it simply to collapse."

The Kennedy legacy: Will she, won’t she?

Caroline Kennedy, daughter of John F Kennedy, has stayed away from the spotlight but is said to be considering a run for the New York Senate seat to be vacated by Hillary Clinton. The Kennedy legacy in the Senate began 56 years ago when her father became junior senator for Massachusetts. Her uncle Teddy represented Massachusetts for more than 40 years and her uncle Robert was senator for New York from 1965 until he was shot in 1968.

Yesterday Barack Obama deflected questions about the woman he hired to help him recruit a vice-presidential running mate. "Caroline Kennedy has become one of my dearest friends. But the last thing I want to do is get involved in New York politics."