November 22, 2008 / 12:49 AM / in 9 years

Obama says drafting bold economic stimulus

4 Min Read

<p>(From left) Senator Hillary Clinton, New Mexico Governor Bill Richardson, and Timothy F. Geithner, President of the Federal Reserve Bank of New York, are seen in a combination file photo.From left Craig Mitchelldyer, Andrea Comas, Keith Bedford</p>

CHICAGO (Reuters) - U.S. President-elect Barack Obama said on Saturday that he was crafting an aggressive, two-year stimulus plan to revive the troubled economy, warning that swift action was needed to prevent a deep slump and a spiral of falling prices.

"If we don't act swiftly and boldly, most experts now believe that we could lose millions of jobs next year," Obama said in prepared remarks for the weekly Democratic radio and video address.

"We now risk falling into a deflationary spiral that could increase our massive debt even further," he said.

A day after U.S. stock markets rallied on his apparent choice of Timothy Geithner as Treasury secretary, Obama gave a bleak assessment of the economy in his most detailed comments on the subject since winning the November 4 election.

Obama in October called for a $175 billion stimulus measure, but his comments in the radio address on Saturday signaled he was prepared to push for a much larger package, though he did not give a price-tag.

He said the plan would set a goal of creating 2.5 million more jobs by January 2011 and would be "big enough to meet the challenges we face."

The proposal for a two-year stimulus plan further indicated a sizable effort. Most such plans are aimed at covering a one-year period.

The number of Americans on the unemployment rolls surged to the highest in 16 years, up more than 540,000, the Labor Department said on Thursday.

Government data also painted an increasingly dire picture of the housing market.

"The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions," Obama said.

Geithner Likely to Head Treasury

<p>Federal Reserve Chairman Ben Bernanke (R) listens to President of the Federal Reserve Bank of New York Timothy Geithner before addressing the Economic Club of New York, in this October 15, 2008 file photo.Lucas Jackson/Files</p>

Democratic sources said Obama had chosen Geithner, the respected president of the New York Federal Reserve, to take the helm at Treasury and help pull the United States out of an economic nosedive.

U.S. stocks, which had been sinking all week, surged more than 6 percent on the news that Geithner, 47, had been selected. U.S. Treasuries fell and the dollar surged.

Obama is expected to formally announced the pick of Geithner on Monday, according to NBC.

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The president-elect and his team have worked to lower expectations that he will be able to fix the economic challenges right away, a theme he reiterated in his address.

"There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better," Obama said.

Obama, who takes over from President George W. Bush on January 20, said he had directed his economic team to draft the stimulus proposal and predicted the Democratic-led Congress would quickly approve it for his signature.

"We'll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jump-start job creation in America and lay the foundation for a strong and growing economy," Obama said.

Congressional Democrats have promised to make a broad economic stimulus a top priority when they reconvene in January. The package is expected to include tax cuts for the middle class and billions of dollars for public works projects, such as the construction of roads, bridges and mass transit.

Hobbled U.S. automakers are negotiating with lawmakers and the White House over a bailout package which they say is urgently needed.

While supporting the idea of a cash infusion for the automakers, Obama has kept a low profile in that debate.

Invoking the principle that the United States should have only one president at a time, he is remaining for now in his home city of Chicago, focusing on forming his Cabinet and putting together his policy plans.

Editing by Philip Barbara

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