President Barack Obama gave a spirited defence of his economic strategy today and said there were signs of recovery but admitted the United States was "not out of the woods just yet".
In his most comprehensive speech to date on the recession-hit economy, Mr Obama rebuffed critics who say he is spending with "reckless abandon."
"History has shown repeatedly that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months - years of low growth, years of low job creation, years of low investment, all of which cost these nations far more than a course of bold, upfront action," he said.
US stocks were lower today after an unexpected drop in US retail sales dampened recent optimism, although bank stocks were boosted by Goldman Sachs posting higher-than-expected first-quarter profits.
"There is no doubt that times are still tough. But by no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope," Mr Obama said in his speech at Georgetown University that analysed the causes of the crisis and the steps he has taken to address it.
He said his $787 billion economic recovery package, steps to recapitalise banks, unfreeze credit markets, stabilise the housing market and shore up the ailing U.S. auto industry were "starting to generate signs of economic progress".
Schools and police departments had cancelled planned layoffs, clean energy companies and construction companies were rehiring workers, and home-owners were refinancing at lower interest rates, he said.
"This is all welcome and encouraging news, but it does not mean that hard times are over. 2009 will continue to be a difficult year for America's economy," Mr Obama said.
There would be more job losses and more people would lose their homes, he warned.
The US economy lost 663,000 jobs last month, pushing the unemployment rate to a 25-year high of 8.5 per cent. The economy shrank at an annual rate of 6.3 percent in the last quarter of 2008, the steepest decline since the first quarter of 1982.
"I know there is criticism out there that my administration has somehow been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children's future," Mr Obama said.
But he said the worst thing his government could do in a recession was cut spending, and it was not good enough to concentrate on simply fixing the immediate crisis. Reforms had to be made now to grow the economy over the long-term.
Congress has passed a record $3.5 trillion budget that Mr Obama says invests in America's economic future, by funding a sweeping reforms of health-care and education and boosting investment in environmentally forms of energy production.
He rebuked critics who said his refusal to nationalise banks was another example of Washington "coddling Wall Street".
He said it was crucial to ensure banks had the capital to start lending again, but, preemptively taking over troubled banks would end up costing taxpayers more money and undermine already shaky confidence.
Mr Obama said if banks needed more capital and could not raise it privately, "we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy."
His administration would also assess the state of struggling auto makers Chrysler and General Motors in a few weeks. He hoped Chrysler would be able to find a viable business partner and GM draw up a business plan that would lead to profitability.