By Caren Bohan and Andy Sullivan
WASHINGTON (Reuters) - President-elect Barack Obama warned on Thursday that the U.S. economy could stay mired in recession for years without bold action and he urged lawmakers to work day and night to pass a massive stimulus plan.
Obama, who takes office on January 20, promised to set a new course for the economy and to quickly toughen the financial regulatory system -- but he gave few new details about a stimulus package certain to come with a huge price tag.
"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 speech on the economy at George Mason University in Fairfax, Virginia.
"If nothing is done, this recession could linger for years. The unemployment rate could reach double digits."
Wall Street showed disappointment that Obama did not offer more specifics. The Dow Jones industrial average was down more than 1 percent in mid-afternoon trading, as the lack of new details added to other factors weighing on the market.
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.
He is seeking approval by mid-February of his plan for tax cuts and public-works spending that could total nearly $800 billion.
SKYROCKETING DEFICITS
Obama and his advisers have already begun intensive negotiations with lawmakers on the stimulus plan. But skyrocketing deficits have made some lawmakers skittish about the price tag.
In addition to tax cuts for families and businesses, the plan would pay for construction and repair of roads and schools and provide aid to cash-strapped cities and states.
Obama has previously said he was considering a plan in the range of $775 billion (510.5 billion pounds), though he has suggested the final cost could exceed that. He gave no dollar figure in the speech.
Obama listed $1,000 tax cuts for middle-class families as one element of the package.
Shortly before Obama delivered his speech, Rep. Nancy Pelosi, the Democratic speaker of the House of Representatives, said there was strong public support for a stimulus plan.
She said that over the next couple of weeks, House committees will work on legislation and that the House will forego its scheduled mid-February recess if work on the measure is not finished by then. "We are not going home" until the legislation is completed, Pelosi told reporters.
Sen. Judd Gregg, the senior Republican on the Senate Budget Committee, said he believed Obama was on the right track in taking an aggressive approach on stimulus.
But he said the details on how the money is spent must be looked at carefully to ensure that it encourages economic activity and does not just worsen long-term debt problems.
Many experts advising both Democratic and Republican lawmakers agree with Obama the dire economy calls for strong action.
RECORD-SETTING PERCENTAGE OF GDP
But a bleak forecast on the U.S. budget deficit has added to some nervousness on Capitol Hill about the plan's size.
A report on Wednesday showed the deficit for the current 2009 fiscal year would triple to around $1.2 trillion, even before taking into account the cost of the stimulus package.
The deficit figure in the Congressional Budget Office report amounts to about 8.3 percent of gross domestic product, easily shattering the post-World War Two record of 6 percent hit in 1983.
Some Republicans and conservative Democrats worry the package could bust the federal budget with new programs that will require ongoing funding.
Sen. Orrin Hatch, a Utah Republican, expressed scepticism Congress could finish the stimulus plan before the recess begins on February 13. "If the right bill is put forward yes, but I'm not sure that's going to happen," Hatch told reporters.
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 quickly 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.
(Additional reporting by Jeremy Pelofsky, Richard Cowan, Tim Ahmann, Rodrigo Campos and Ellis Mnyandu; editing by David Wiessler and Philip Barbara)
