By Caren Bohan and Andy Sullivan
WASHINGTON (Reuters) - President-elect Barack Obama warned on Thursday 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.
"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."
But he gave few new details about the package of tax cuts and public-works spending likely to cost $800 billion or more, and some senators from his own Democratic Party said they were not sure he was going to get "the biggest bang for the buck."
Wall Street showed disappointment that Obama did not offer more specifics. The Dow Jones industrial average was down more than 1 percent in midafternoon trading, but recovered to close down 27.24 points or 0.31 percent.
On the day, Congress formally confirmed him as the winner of the November 4 election 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 is seeking approval by mid-February of the proposed stimulus package he is crafting in close consultation with the Democratic-led Congress.
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.
Harvard Law School professor Cass Sunstein confirmed he would take the post of regulatory "czar" in the Obama administration, spearheading the drive to restore stability to Wall Street and the U.S. economic system.
Obama planned to meet Mexican President Felipe Calderon on Monday, continuing a tradition in which U.S. presidents have met with the Mexican leader before they are inaugurated.
SKYROCKETING DEFICITS
Obama has also been talking with Republican lawmakers to try to win their support. But skyrocketing deficits have made some Republicans and moderate Democrats skittish.
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 said previously he was considering a plan in the range of $775 billion, although 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 would work on legislation and that the House would forgo its scheduled mid-February recess if work on the measure was not finished by then. "We are not going home" until the legislation is completed, Pelosi told reporters.
Senate Democrats met with Obama advisers and are expected to meet again in a rare Sunday session to continue hashing out details of the recovery plan. Some emerged with doubts, particularly over the tax cut plan.
"There is strong support for the need to do a bold economic recovery plan but we've got to really focus on how to get the biggest bang for the buck," Sen. Kent Conrad, chairman of the Senate Budget Committee and a North Dakota Democrat, said.
Republican leaders in Congress have praised Obama's willingness to include them in discussions on the stimulus plan and have said they are in general agreement that economic conditions warrant action.
RECORD-SETTING PERCENTAGE OF GDP
But a bleak forecast released this week on the U.S. budget deficit has added to Republican calls to take a careful look at the size of the plan. They have also warned against including new spending programs that would require ongoing funding.
A report on Wednesday showed the deficit for the current 2009 fiscal year would triple to about $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.
"I do believe that our economy is facing a crisis," House Minority Leader John Boehner, an Ohio Republican, told reporters. "And I do believe Washington has to act."
Noting the whopping deficit, Boehner added, "Given the deficit issues that we're facing, we've got to address the economic crisis, but we also have to address how much debt we're going to build up."
(Additional reporting by Jeremy Pelofsky, Richard Cowan, Tim Ahmann, Rodrigo Campos, Ellis Mnyandu and Jason Szep; Editing by Peter Cooney)
