Barack Obama vows to spend his way out of crisis with $700bn plan

Just three weeks after winning the election, Mr Obama said work on resurrecting the US economy would begin immediately because "we do not have a minute to waste".

Introducing the senior members of his economic team, Mr Obama said the economy was in caught in a "vicious cycle" and was facing a "crisis of historic proportions".

Aiming to convince the markets and the American public that there was light at the end of the tunnel, Mr Obama said his stimulus package that would "not only deal with the immediate crisis but lay the groundwork for long-term sustained economic growth".

He refused to put an estimate of the cost, but Larry Summers, the new chairman of the national economic council, has suggested it would need to be as large as $700 billion – in addition to the bail-out of the same amount agreed by Congress last month.

With help already provided for ailing financial institutions, spending on rescuing the economy could approach $2 trillion.

Aiming to create 2.5 million jobs by 2011, the new president's spending spree promises to be the biggest public works programme since the New Deal, which dragged the US out of the Great Depression in the 1930s.

As Alistair Darling, the Chancellor of the Exchequer, revealed his own stimulus measures in the pre-budget report and the EU prepared to mount another effort to spark economies into life, Mr Obama admitted his package "will be costly".

"American tax payers are understandably concerned about how we are going to pay for all that. The right answer is we have to first focus on getting the economy back on track," he added.

Mr Obama said the federal budget would "scoured for places where meaningful cuts and sacrifices" and said the stimulus package would include a "plan for a sustainable fiscal situation long term". But it was clear that for the next few years heavy budget deficits would be tolerated.

In contrast to Mr Darling's tax hike on the rich, Mr Obama hinted he would delay plans to increase taxes for those earning $250,000 or more until 2011.

But the president-elect was critical of the big car makers, saying he was surprised they did not have a better plan for their future before asking Congress to approve $25 billion in emergency loans last week.

Flanked by his new appointments at a press conference in Chicago, Mr Obama promised to regularly update the nation with their recommendations and proposals over the coming weeks, in order to be ready to "hit the ground running" when he takes office on Jan 20.

"It's important for the American people to understand we are committed to making sure the financial system works in the way it should," he said.

Mr Obama described his economic team, whose names had mostly been leaked in advance, as the "best and the brightest" of American talent in their fields.

Timothy Geithner, 47, the new treasury secretary, will oversee the existing $700 billion bail-out package and was praised by his new boss for the breadth of his experience at treasury, as an aide to Mr Summers, the International Monetary Fund and the New York Federal Reserve.

Mr Summers, treasury secretary under Bill Clinton, will effectively be chief economic policy adviser to the new president, with an office just a few doors away from the Oval Office, and will arguably have the more influential role of planning economic policy in a time of crisis.

Christina Romer, an academic at the University of California, one of the most respected economists in the country and an expert on recessions, was unveiled as chairman of the council of economic advisers. Melody Barnes, the first African American woman appointed to the cabinet so far, was introduced as head of domestic policy.