UPDATE 1-Obama says drafting bold economic stimulus

(Adds full details of radio address)

By Caren Bohan and Jeff Mason

CHICAGO, Nov 22 (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," Obama said in prepared remarks for the weekly Democratic radio and video address.

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

A day after U.S. stock markets rallied on his apparent 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 Nov. 4 election.

Obama in October called for a $175 billion stimulus measure, but his comments in the radio address on Saturday signaled he was prepared to push for a much larger package, though he did not give a price-tag.

He said the plan would set a goal of creating 2.5 million more jobs by January 2011 and would be "big enough to meet the challenges we face."

The proposal for a two-year stimulus plan further indicated a sizable effort. Most such plans are aimed at covering a one-year period.

The number of Americans on the unemployment rolls surged to the highest in 16 years, up more than 540,000, the Labor Department said on Thursday.

Government data also painted an increasingly dire picture of the housing market.

"The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions," Obama said.

GEITHNER LIKELY TO HEAD TREASURY

Democratic sources said Obama had chosen Geithner, the respected president of the New York Federal Reserve, to take the helm at Treasury and help pull the United States out of an economic nosedive.

U.S. stocks, which had been sinking all week, surged more than 6 percent on the news that Geithner, 47, had been selected. U.S. Treasuries fell and the dollar surged.

Obama is expected to formally announced the pick of Geithner on Monday, according to NBC.  Continued...