Feb. 9 (Bloomberg) -- President Barack Obama said the U.S. economy faces a “full-blown crisis” and the nation needs government action now to put people back to work.

“We can’t depend on government alone to create jobs or economic growth,” Obama said tonight in his first primetime news conference since taking office. “But at this particular moment, with the private sector so weakened by this recession, the federal government is the only entity left with the resources to jolt our economy back into life.”

Obama spoke just hours after the Senate held a procedural vote that cleared the way for passage of its economic-stimulus bill tomorrow. The House passed its version on Jan. 28, and the two measures, both totaling more than $800 billion, will have to be reconciled before the president can sign the legislation.

Obama also said while the plan was “not perfect,” he could say “with complete confidence that a failure to act will only deepen this crisis.”

He’s facing some second-guessing in his own Democratic Party and opposition from Republicans, who say the stimulus package includes too much spending and not enough tax cuts. His campaign to get the legislation passed took him today to Elkhart, Indiana, an area hard-hit by manufacturing job losses.

‘Turned Upside Down’

“If there’s anyone out there who still doesn’t believe this constitutes a full-blown crisis, I suggest speaking to one of the millions of Americans whose lives have been turned upside down because they don’t know where their next paycheck is coming from,” Obama said.

Obama has been telling lawmakers and Americans that the country can’t afford to waste much more time debating the package. The economy needs a significant boost after losing 3.6 million jobs over the last 13 months, the biggest slump in the postwar period. The job losses, combined with tight credit markets and falling home prices, have constrained consumer spending, which makes up about two-thirds of the economy.

Obama noted that the pace of job losses has been steeper over the last three months.

“This is not your ordinary, run-of-the-mill recession,” he said. The U.S. must avoid the economic stagnation that gripped Japan in the 1990s, “a negative spiral that becomes much more difficult for us to get out of,” he said.

Working With Banks

Obama also said the government must work with banks to “clean up their balance sheets” before deciding whether more bailout money may be needed.

Obama criticized how the Troubled Asset Relief Program was administered under former President George W. Bush, saying money was spent with too little transparency and oversight. That will change, he said, with the distribution of the second $350 billion from the fund.

“We don’t know yet whether we’re going to need additional money, or how much additional money we’ll need, until we’ve seen how successful we are at restoring a sense of confidence” in the markets, Obama said.

U.S. Treasury Secretary Timothy Geithner is scheduled tomorrow to announce Obama’s plan to shore up the financial industry after a one-day delay so administration officials could focus on winning Senate approval for their economic stimulus plan. He will have to address critics who say TARP isn’t working.

TARP Money

“We didn’t get as big a bang for the buck as we should have” with TARP, Obama said. “My immediate task is making sure that the second half of that money -- $350 billion -- is spent properly.”

On foreign policy, Obama said his national security team is reviewing U.S. policy toward Iran with an eye toward engaging the Persian Gulf nation in a “constructive dialogue.”

“We will be looking for openings that can be created where we can start sitting across the table,” he said. “There’s the possibility at least of a relationship of mutual respect and progress.”

Obama said any diplomatic overtures would make clear that the U.S. continues to have concerns about Iran. Among those is Iran’s funding of terrorist groups such as Hezbollah and Hamas, which he called “unacceptable.” The possibility of Iran acquiring nuclear weapons would be “profoundly destabilizing” to the region, he added.

He said Afghanistan poses a “big challenge” for the U.S. as American forces try to root out terrorists and stabilize the country.

“We just saw an election in Iraq that went relatively peacefully; you get a sense that the political system is now functioning,” Obama said. “You do not see that yet in Afghanistan.”

To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Kristin Jensen in Washington kjensen@bloomberg.net

Last Updated: February 9, 2009 21:03 EST