Dec. 23 (Bloomberg) -- Vice President-elect Joe Biden said the incoming Obama administration and congressional leaders are nearing an agreement on the broad principles of an economic- stimulus package.

“We’re getting awful close,” Biden said in Washington today before meeting with some of President-elect Barack Obama’s top economic advisers. “We’re all on the same page.”

Biden said the discussions cover the kind of spending and overall cost of the package. He wouldn’t confirm reports that the plan will cost $800 billion over two years, saying only that “it will be substantial.”

Before the meeting, Obama adviser and former Treasury Secretary Lawrence Summers said the U.S. will face its worst economic slump since World War II without government action to spur job growth and investment. Not since Vice President Gerald Ford replaced Richard Nixon in 1974 has a U.S. president started the job with the economy in a recession.

A Commerce Department report today showed the U.S. economy shrank in the third quarter at a 0.5 percent annual pace, after a growth rate of 2.8 percent in the previous quarter. The figures also showed consumer spending, which accounts for more than two- thirds of the economy, declined at a revised 3.8 percent annual rate, the first drop since 1991 and the biggest since 1980.

Job Cuts

Americans may tighten their budgets further after employers cut 533,000 workers from payrolls in November, the most in three decades, and the unemployment rate jumped to 6.7 percent, the highest level since 1993.

“We’re facing a serious economic crisis,” said Summers, President Bill Clinton’s last Treasury secretary. In the Obama administration, Summers will serve as director of the White House’s National Economic Council.

Summers said the stimulus plan will have the twin goals of job creation and planning for the future with investments in infrastructure and health care, among other things.

“The American economy is falling short of what it could be,” Summers said. “In this crisis lies an opportunity to create the jobs that Americans need, doing the work that America needs to be done.” He said the investments won’t create what he called “make-work” projects.

December Meeting

During a Dec. 16 meeting, Obama and his top economic advisers discussed some of the possible elements for an economic recovery plan. Projects might include funding infrastructure repair projects that have already won approval; insulating homes to save $1 billion in energy costs; modernizing health information technology; and improving technology in schools.

Companies such as power-generation systems maker General Electric Co. and construction equipment manufacturer Caterpillar Inc. may benefit as Obama invests in infrastructure and new energy sources.

Obama’s team is working on a draft proposal as he vacations in Hawaii with his family. Other top advisers meeting today with Biden included Melody Barnes, who will direct Obama’s Domestic Policy Council, and Carol Browner, his choice for a new position as head of the National Energy Council.

The goal of the plan is to create or save 3 million jobs, up from the 2.5 million Obama announced in November. Biden said Obama and his team increased the target because conditions are getting worse in the U.S. economy.

“That’s a reflection of the deepening crisis,” he said. “There’s a need to do that, and we don’t think it’s going to require any significantly larger increase in investment.”

Senators’ Letter

Biden said the package will contain no “earmarks,” or pet spending projects that lawmakers often insert in appropriations legislation. “This economic recovery package will not become a Christmas tree,” he said.

Even so, members of the Senate and House are vying for help for their regions. In a letter to Obama, Biden and congressional leaders today, Democratic Senators Sherrod Brown of Ohio, Debbie Stabenow of Michigan, Tom Carper of Delaware and Sheldon Whitehouse of Rhode Island pushed for extra funds for areas hard hit by plant closings and unusually high unemployment.

The group’s recommendations included spending $2 billion on “economic adjustment assistance” programs through the Economic Development Administration and an additional $1.5 billion on a fund that helps retrain workers. The spending would amount to economic “disaster relief,” the senators wrote.

“What may start as an isolated layoff or plant closing can quickly ripple through an entire community,” the senators said. Communities “cannot recover from the double blow of national economic recession and massive local job loss without specialized assistance from the federal government,” they said.

Separately, Biden told reporters that a report due out later today on the Obama transition team’s communications with Illinois Governor Rod Blagojevich and his staff will show “no inappropriate contact.” Blagojevich, a fellow Democrat, faces federal corruption charges including allegations that he tried to sell the Senate seat that Obama left vacant in Illinois.

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

Last Updated: December 23, 2008 15:11 EST