Obama costly stimulus needed to jolt U.S. economy

By Jeff Mason and Ross Colvin

CHICAGO (Reuters) - President-elect Barack Obama promised on Monday to jolt the faltering U.S. economy with a costly stimulus package next year and introduced the team that will help him navigate the global financial crisis.

Obama, who warned again that the economy would likely get worse before it got better, declined to put a price tag on the two-year stimulus proposal which other Democrats have estimated at hundreds of billions of dollars.

The scope of the economic crisis has widened in the 20 days since Obama's White House win. Auto companies warned they were short on cash, unemployment numbers rose and the government injected $20 billion into Citigroup.

"These extraordinary stresses on our financial system require extraordinary policy responses," Obama said, adding his administration would honor public commitments made President George W. Bush's team to address this crisis.

Separately, the president-elect indicated he had not decided whether to roll Bush's 2001 tax cuts for the wealthy early or allow them to expire at the end of 2010 as scheduled.

Obama said his team was already working on the details of a package to save or create 2.5 million jobs and urged the next Congress to act on it immediately in early January.

"We have to make sure that the stimulus is significant enough that it really gives a jolt to the economy," he said, describing its price only as costly.

"I want to see it enacted right away. It is going to be of a size and scope that is necessary to get this economy back on track."

Obama had harsh words for the struggling U.S. auto industry, acknowledging he did not want the sector to fail but criticizing company executives for failing to present a clear recovery plan when they testified before Congress last week.

Obama, who takes over from Bush on January 20, confirmed his economic team at the news conference.

Timothy Geithner, 47, president of the New York Federal Reserve Bank, will become Treasury secretary, and Lawrence Summers, 53, a former Treasury secretary under President Bill Clinton, will be director of the National Economic Council.

They did not speak at the event, which Vice President-elect Joe Biden also attended.

U.S. stocks rallied late on Friday after news leaks about Geithner's appointment.

Stocks pared gains during Obama's remarks on disappointment over his refusal to specify a figure but then rallied strongly on the back of Washington's move to support Citigroup and on general happiness with Obama's new team.

"People are confident in what (Geithner) can do, he's more market friendly, or he's perceived that way," said Neil Massa, senior trader at MFC Global Investment Management in Boston. "That's helping the overall tone of the market."