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.”
Obama said the country would see a substantial budget deficit next year, which he described as “bigger than we’ve seen in a very long time.”
“American taxpayers are understandably concerned, if we already have a big deficit, and now we’re added an additional stimulus, how are we going to pay for all that?” he said.
“The right answer is that we have to first focus on getting the economy back on track.”
Obama said he would discuss steps toward a “sustainable and responsible budget scenario” at a news conference on Tuesday at which he is expected to announce further members of his economic team.
“We’ll have to scour our federal budget, line by line, and make meaningful cuts and sacrifices, as well, something I’ll be discussing further tomorrow,” he said.
Obama supports a bailout for Detroit automakers but said he was disappointed that the chief executives for General Motors Inc., Ford Motor Co., and Chrysler LLC did not present a concrete plan in their testimony before Congress.
“I think Congress did the right thing, which is to say, ‘You guys need to come up with a plan and come back before you are going to get any taxpayer money,’” he said.
Obama has kept a low public profile since his November 4 victory over Republican John McCain, remaining in Chicago to pick his Cabinet but not formally announcing any of his choices. Geithner was the first official Cabinet announcement.
Obama also named University of California, Berkeley, economics professor Christina Romer to head his Council of Economic Advisors and Melody Barnes to head his Domestic Policy Council. Barnes, a former chief counsel on the Senate Judiciary Committee, was a policy advisor to Obama’s presidential campaign.
Summers is also a possible successor to Federal Reserve Chairman Ben Bernanke, whose term ends in January 2010.
In Washington, Bush said the government stood ready to help the banking system as it did with Sunday’s Citigroup deal.
Bush, speaking after a meeting with Treasury Secretary Henry Paulson, said he had also spoken with Obama about the Citigroup rescue and promised to inform the incoming president and his economic team of any future major decisions.
Additional reporting by Caren Bohan, Andy Sullivan, and Leah Schnurr; editing by David Wiessler