Obama calls for 'dramatic action' on stimulus package

The U.S. may not be able to recover from the current economic crisis unless immediate action is taken to implement a stimulus package, president-elect Barack Obama said Thursday in a major speech on the economy.

"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," Obama said in the speech he delivered at George Mason University in Fairfax, Va.

"More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

"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. If nothing is done, this recession could linger for years."

Obama warned that if nothing is done, the unemployment rate could reach double digits and the economy could fall $1 trillion US short of its full capacity, which would translate to more than $12,000 US in lost income for a family of four.

"In short, a bad situation could become dramatically worse."

Obama called on Congress to work with his team, day and night and on weekends if necessary, to get his plan passed in the next few weeks.

Obama's speech comes a day after the congressional budget office released figures estimating the federal budget deficit will reach an unprecedented $1.2 trillion US in 2009, up from $455 billion.

It also estimated the economy will shrink by 2.2 per cent this year, with the unemployment rate eclipsing nine per cent early next year. The unemployment rate is currently at 6.7 per cent but is expected to rise to seven per cent when figures are released Friday.

Obama's team has been working with Democratic congressional leaders on a stimulus package, which is expected to be between $675 billion and $775 billion, and include up to $300 billion in tax cuts.

Obama has said he expects to sign the rescue bill, which he has named the American recovery and reinvestment plan, by the end of January or the first of February. Obama has said the No. 1 goal of the plan is to create three million jobs, with more than 80 per cent in the private sector.

In the speech, Obama acknowledged that the new stimulus spending will "certainly add to the budget deficit." 

He also said he understands some "might be skeptical of this plan" because so much federal money has already been spent or committed in an attempt to get credit flowing again, largely to no avail.

"But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy," he said.

The president-elect argued that the private sector cannot be counted on to do what is needed in the current economic situation.

"At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe."

Obama said the scale of this plan is unprecedented but so, too, is the severity of the situation. 

"We have already tried the wait-and-see approach to our problems, and it is the same approach that helped lead us to this day of reckoning."

Obama blamed the current situation on "profound irresponsibility" in the halls of Washington and corporate boardrooms and a lack of regulatory scrutiny. Wall Street executives sought profit with little regard for risks as politicians spent taxpayer money without discipline, he said.

Politicians will no longer be able to "dole out money behind a veil of secrecy," Obama said, as Americans will be able to go online to see how their tax dollars are being spent.

He said the "weak and outdated regulatory system" must be reformed so that  "Wall Street wrongdoers" can no longer slip through regulatory cracks.  

Obama laid out other goals, including doubling the production of alternative energy over three years, updating most federal buildings to improve energy efficiency, making medical records electronic, expanding broadband networks and updating schools and universities.