Obama to urge dramatic action to lift U.S. economy

WASHINGTON (Reuters) - President-elect Barack Obama will seek on Thursday to rally support for a massive fiscal stimulus package by warning that the United States could remain mired in recession for years without bold action.

Obama, who will take office on January 20, promises to set a new course for the economy and to move quickly to toughen the financial regulatory system.

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," the Democratic president-elect said in excerpts from a speech to be delivered later on Thursday.

"If nothing is done, this recession could linger for years. The unemployment rate could reach double digits."

Obama will deliver his remarks at George Mason University in Fairfax, Virginia, at 11 a.m. EST.

As he prepares to take over from Republican President George W. Bush, Obama is about to inherit an economy that has been in recession for more than a year.

Obama and his advisers have been working with the U.S. Congress to craft a two-year stimulus plan that could total more than of $775 billion.

In the speech excerpts, Obama said the cost of the package of tax cuts and spending measures he is proposing would be "considerable," but that it was needed to keep the economy from sinking into a vicious cycle of weak consumer spending, job losses and a further tightening of credit markets.

In addition to the fiscal package, Obama urged further measures to shore up confidence in the financial system and restore smooth functioning of the frozen credit markets.

He vowed to move quickly to overhaul the Wall Street regulatory system and to crack down on "wrongdoers" who slip through regulatory cracks, in an apparent reference to the alleged $50 billion fraud scandal involving financier Bernard Madoff.

(Reporting by Caren Bohan and Tim Ahmann; editing by Mohammad Zargham)