Obama: There is worse to come on the economy

BARACK Obama today issued a grim warning to the American people, telling them that the economy was likely to get "worse before it gets better".

The president-elect did not pull his punches in his stark assessment of what lay ahead for the US after he moves into the White House on 20 January, saying the country was facing a crisis of "historic proportions".

Mr Obama said most experts believed that millions of jobs would be lost before the US could turn the corner and shake off the financial crisis.

The downbeat warning came as Mr Obama unveiled his economic "dream team" to help him confront the global economic problems. Wall Street responded favourably with its biggest two-day rally in 21 years. The Dow Jones climbed 396.97 points, or 4.9 per cent, to 8,443.39. The surge was partly in response to the earlier announcement of a $20billion bail-out of the Citigroup banking group.

Mr Obama unveiled his blueprint for turning around the economy at a press conference in Chicago. As well as a multi-billion-dollar stimulus package, there would also be tax cuts for the "vast majority" of Americans, paid for by the nation's "wealthiest".

He plans to increase taxes for people earning more than $250,000 a year. "We've got to restore some balance to our tax code, and the Bush tax cuts were disproportionately targeted to the very wealthiest Americans - those who were making more than a quarter million dollars a year can afford to pay a little more," the president-elect said.

"And it is important, if we're going to help pay for some of these expenditures that are absolutely necessary to get our economy back on track, that those who are in a position to pay a little more do so."

Timothy Geithner was confirmed as Treasury secretary, and economist and Harvard professor Lawrence Summers will head the National Economic Council. Christina Romer will be chairwoman of the Council of Economic Advisers and Melody Barnes will lead the Domestic Policy Council. Ms Barnes was on the Obama transition team and previously executive vice-president for policy at the Centre for American Progress, a policy research body.

Mr Obama said his economic team's first job will be to work with Congress to pass an economic stimulus package. "Not only do I want the stimulus package to deal with the immediate crisis, I want it also to lay the groundwork for long-term sustained economic growth," he said.