Obama says drafting bold economic stimulus

By Caren Bohan and Jeff Mason

CHICAGO (Reuters) - U.S. President-elect Barack Obama said on Saturday that he was crafting an aggressive two-year stimulus plan to revive the troubled economy, warning that swift action was needed to prevent a deep slump and a spiral of falling prices.

"If we don't act swiftly and boldly, most experts now believe that we could lose millions of jobs next year," the Democratic president-elect said in a weekly radio address.

Obama, who succeeds President George W. Bush on January 20, said the economy could get worse before it gets better.

"We now risk falling into a deflationary spiral that could increase our massive debt even further," he said.

Obama said the plan would aim to save or create 2.5 million jobs by January 2011 and would be "big enough to meet the challenges we face." Any additional jobs would offset what is expected to be a dismal employment picture in the near future.

A day after U.S. stock markets rallied on his reported choice of Timothy Geithner as Treasury secretary, Obama gave a bleak assessment of the economy in his most detailed comments on the subject since winning the November 4 election.

In another pivotal appointment, New York Sen. Hillary Clinton appeared all but certain to become Obama's secretary of state, bringing his one-time main Democratic rival into the fold of his new administration.

The likely appointments of Clinton and Geithner, president of the New York Federal Reserve and a former Treasury official in President Bill Clinton's administration, underscored a centrist bent to the personnel decisions being made by Obama, who had a liberal record as a U.S. senator from Illinois.