Obama: Recession will worsen without bold action

Obama: 'Deficit of trust'

More Videos

WASHINGTON (Reuters) -- President-elect Barack Obama will seek 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 Jan. 20, promised 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," Obama said in excerpts from a speech to be delivered later Thursday. "If nothing is done, this recession could linger for years. The unemployment rate could reach double digits."

The Democratic president-elect will deliver his remarks at George Mason University in Fairfax, Virginia, at 11 a.m.

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 Congress to craft a two-year stimulus plan that could total more than $775 billion.

The package will include tax cuts and money for the building of new roads, bridges and schools. It would also pay for renewable energy projects, aid to cash-strapped state governments and enhanced unemployment benefits.

Obama hopes to secure passage of the economic plan by mid-February.

"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," he said in the speech excerpts. "More families will lose their savings."

On Wednesday, a report on the U.S. budget outlook painted a bleak picture that might add to Obama's challenges in pushing his plan through Congress.

The budget deficit for the current 2009 fiscal year ending Sept. 30 is expected to nearly triple to around $1.2 trillion, according to the Congressional Budget Office.

A deficit in that range would be about 8.3% of GDP, shattering the previous post-World War Two record of 6% hit in 1983.

Obama acknowledged this week the country could face trillion-dollar deficits for years to come. He has pledged to try to rid government of wasteful spending and to look at ways to address costly entitlement programs such as Social Security and Medicare.

But the $1.2 trillion forecast for the budget deficit this year could be a low estimate. The CBO number does not factor in the cost of Obama's proposed stimulus plan.

Obama has not ruled out the possibility that the stimulus package could end up totaling more than $775 billion as the measure works its way through Congress.

"We've seen ranges from $800 billion to $1.3 trillion and our attitude was that given the legislative process, if we start towards the low end of that, we'll see how it develops," Obama told CNBC in an interview Wednesday.

Some Republicans and conservative Democrats have expressed concern that the stimulus package could bust the federal budget with new programs that will require funding for years to come.

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.

Obama said his administration would use the "full arsenal of tools to get credit flowing again."

He also called for a stepped-up effort to prevent home foreclosures.