It is becoming increasingly clear what President-Elect Barack Obama plans to do about the economic crisis currently ravaging the U.S. (and world) economy: big government spending combined with, and this is new, major tax cuts.

The latest reports say that Obama wants tax cuts to make up 40% of a stimulus package which may be worth as much as $775 billion. This means that Americans will receive up to $300 billion in tax cuts.

A House Democratic aide told Bloomberg News that ‘the plan would attempt to boost consumer demand by spending $140 billion on tax breaks worth $500 for individuals and $1,000 for couples.’

Making tax cuts for the middle class a prominent part of the economic stimulus package is smart politics; it will make it fairly easy to convince Republicans to vote for the measure despite their objection to such big spending plans the package will undoubtedly also contain.

Senate Minority Leader Mitch McConnell (R-Ky.) already said ‘his party would support an immediate middle-class tax cut as part of any stimulus package.’

Bloomberg goes on to explain: ‘The change would come by altering tax-withholding rules, rather than through a rebate check as with the previous stimulus plan enacted last year, so that workers would see an immediate increase in their take-home pay. The $500 tax credit would apply to the first $8,100 of wages, meaning a worker who earns $24,400 a year and is paid twice a month would get about $60 extra per paycheck for four months.’

Although many Americans, including Republicans, will happily agree to cut taxes for the middle class, other aspects of Obama’s plan may be severely criticized by fiscal conservatives: he says he wants to create approximately 600,000 new government jobs. He also plans to “create” (not merely “save”) 2.4 million jobs in the private sector. 

This part of his plan would cost the federal government many hundreds of billions. Fiscal and libertarian conservatives would add that such blatant intervention in the private sector would also pollute the market and artificially create and retain jobs that would not have existed if it was not for active government support: if a job cannot survive on its own merits but only because the government saves it, it has no right to exist.

Although tax cuts are not part of the traditional liberal approach to the economy, big spending in both the public and private sector most certainly is. The current crisis is not the cause for these plans, it is merely a convenient excuse for the liberal wing of the Democratic Party to pursue economic policies they dreamt about pursuing for years, even decades.

Obama is quickly proving himself to be a political genius, but clearly a domestic liberal nonetheless.