Dec. 21 (Bloomberg) -- President-elect Barack Obama, faced with a deteriorating economy, is expanding his stimulus package with a goal of creating or saving 3 million jobs over two years, a transition aide said last night.

The new target, revised from 2.5 million jobs he previously announced, came at the suggestion of Christina Romer, Obama’s pick to head the Council of Economic Advisers, during a Dec. 16 meeting with the president-elect’s top economic advisers, the aide said, speaking on condition of anonymity. Romer said the short, medium and long-term economic forecasts have worsened since Obama outlined the plan on Nov. 22, the aide said.

Obama, who takes office Jan. 20, is making job creation his first priority as government reports suggest unemployment will grow further in the worst economy since World War II. General Motors Corp., Ford Motor Co. and Chrysler LLC will shutter about 59 factories over the next month as sales plunge. GM and Chrysler will get $13.4 billion in emergency government loans to stay afloat.

“We’ve got to begin to stem this bleeding here, and begin to stop the loss of jobs and the creation of jobs,” Vice President-elect Joe Biden said on ABC’s “This Week” program today.

“The day we’re sworn in, the thing that we have to worry about is the further collapse of this economy,” Biden added. “No president raising his right hand will ever have been in the position by the time he says ‘I so swear’ and drops his hand, will he have such an immediate urgent obligation of consequence since Franklin Roosevelt.”

Job Losses

Romer said the economy is likely to lose 3 million to 4 million jobs over the next year and the unemployment rate is likely to rise to above 9 percent. As a result, she said, the initial jobs estimate for the package was too timid, according to the aide.

Romer didn’t immediately return phone messages left at her home and office today.

The meeting also included Biden; Obama’s designee for Treasury secretary, Timothy Geithner; his pick for director of the White House National Economic Council, Lawrence Summers; and Paul Volcker, Obama’s choice to head a new Economic Recovery Advisory Board.

The same day the meeting was held, the Federal Reserve lowered the interest rate for overnight loans between banks to between zero and 0.25 percent from 1 percent. The Labor Department reported on Dec. 5 that employers eliminated jobs at the fastest pace in 34 years in November and the unemployment rate rose to 6.7 percent.

“We are running out of the traditional ammunition that’s used in a recession,” Obama said last week just before the Fed’s announcement.

Needs Grow

As unemployment has increased, estimates of what is needed to pull the nation out of the slump have continued to grow, with some economists calling for a $1 trillion spending program.

Obama representatives met this week with congressional staffers to discuss a plan estimated between $675 billion to $775 billion, the aide said, though earlier this week another aide said Obama may ask Congress to approve as much as $850 billion. Obama hasn’t specified a figure.

Obama’s team on Dec. 16 discussed elements that could be included in the recovery plan to provide an immediate jobs boost while laying a foundation for long-term economic health, according to the aide.

Examples of such projects included funding already approved infrastructure repair projects; insulating homes to save $1 billion in energy costs; modernizing health information technology by converting to paperless systems; and advancing technology in schools and provide teachers with better training.

No Pet Projects

Obama during the meeting told his advisers that spending proposals can’t include lawmakers’ pet spending projects; that funds should be directed toward already approved projects so jobs can be created quickly; and that government should help facilitate private ventures by removing bureaucratic red tape.

Obama also said he wants to enact measures designed to protect workers and families from future recessions.

Obama and his family arrived yesterday for a two-week holiday in Hawaii. Obama’s advisers will use the guidelines with the intent of having a draft of the plan ready when he returns.

To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

Last Updated: December 21, 2008 16:18 EST