"A world that depends on the strength of our economy is now watching and waiting for America to lead once more, and that is what we will do."
Mr Obama said that, with US interest rates near zero, and economic activity and lending still shrinking, it was up to the government to act.
"Only the government can provide the short-term boost necessary to lift us from a recession this deep and severe," he said.
"Every day we wait, or point fingers, or drag our feet, more Americans will lose their jobs, more families will lose their savings, more dreams will be deferred and denied, and our nation will sink deeper into a crisis that at some point, we may not be able to reverse."
"I urge Congress to move as quickly as possible on behalf of the American people."
Mr Obama, who takes office on 20 January, has spent his first week in Washington focusing on his plan to revive the struggling US economy, which is entering its worst recession since the 1930s.
KEY ELEMENTS IN STIMULUS PLAN
Immediate tax cuts of $1,000 per family
Increased benefits and health care for the unemployed
Computerising all health care records in five years
Doubling investment in alternative energy and re-shaping energy grid
Aid to states to help maintain vital services
His stark warning comes as US job losses for 2008 are expected to reach 2.5 million when the December figure is released on Friday.
Mr Obama said his plan would create three million jobs by 2011.
But in a bid to gain bipartisan support for his plan, he is also including substantial tax cuts for both individuals and businesses, as well as a large programme on infrastructure spending on such items as roads and schools.
Unemployment is rising as the slowdown bites
His task has been made more difficult by the projections by the Congressional Budget Office, released on Wednesday, that the budget deficit will reach $1.2 trillion this year - before any extra stimulus plan.
Even the Democratic chair of the House Budget Committee, John Spratt, said that he had been shocked when he saw the figure.
The size of the package means that his hopes of Congress passing the plan by the time he takes office have faded, with mid-February now seen as the earliest date that Congress could take action.
Mr Obama acknowledged that there was substantial scepticism among the US public about government intervention in the economy.
The US economic is set to continue to shrink in 2009
"I understand that some might be sceptical of this plan. Our government has already spent a good deal of money, but we haven't yet seen that translate into more jobs or higher incomes or renewed confidence in our economy," Mr Obama said.
He said that any decisions on spending would be made transparently and informed by "independent experts", while he would launch an "unprecedented effort" to "eliminate unwise and unnecessary spending".
Mr Obama's speech seemed to lift some stock markets in Europe.
"The message is just going down well. There is a belief that there's something about this man and something about this plan," said Howard Wheeldon, senior strategist at BGC Partners in London.
But US stock markets were still reflecting the gloomy trading figures from many companies over Christmas.
Regulating Wall Street
Recent scandals such as those involving Bernard Madoff have engulfed Wall Street
Mr Obama said that the crisis was caused "an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington."
He added that there had to be a "sweeping effort" to address the foreclosure crisis and keep the financial system functioning.
He pledged to reform "a weak and outdated" regulatory system to protect consumers and investors from the "reckless greed and risk-taking" that should "never endanger our prosperity again".
"No longer can we allow Wall Street wrongdoers to slip through the regulatory cracks. No longer can we allow special interests to put their thumbs on the economic scales," he said.
He also vowed to do more to help families who had been directly hit by the downturn, including those who are facing foreclosure.
In a concrete sign that Wall Street is now prepared to help such families, it emerged that some leading bankers have withdrawn their opposition to allowing bankruptcy judges to modify the terms of mortgages in arrears in order to prevent foreclosures.
According to a report in the Wall Street Journal newspaper, the huge US bank Citigroup is now negotiating with key Congressional committees on a deal which would give judges unprecedented powers, something long opposed by the financial services industry.
Around 40% of Mr Obama's stimulus package will consist of tax breaks, including rebates for people earning less than $200,000 a year, as well as tax credits for companies taking on additional staff.
Besides $500 tax cuts for most workers and $1,000 for couples, the proposals could include tax breaks of more than $100bn for businesses.
The plan is likely to allow firms incurring losses last year to take a credit against profits dating back five years, instead of the two years currently allowed.
Another provision would award a one-year tax credit costing $40bn-50bn to companies that hire new workers, and would provide other incentives for business investment in new equipment.
Mr Obama's economic recovery plan depends on swiftly pumping hundreds of billions of federal dollars into the economy to create jobs.
The focus is on tax cuts and government spending that can provide an immediate lift to the economy.
However, the proposals also appear to contain money that might not actually be spent for several years, such as plans to rebuild the electric power grid and buy billions of dollars of computers and software for the health care sector, and to refurbish public schools.
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