A senior economic adviser to the White House has defended a $787bn financial stimulus package, saying that it is working despite rising US unemployment.
Lawrence Summers, head of the National Economic Council, said on Friday that President Barack Obama's healthcare and energy policy agenda would also drive economic growth.
"We were at the brink of catastrophe at the beginning of the year, but we have walked some substantial distance back from the abyss," Summers said in a speech at the Peterson Institute for International Economics in Washington.
"Substantial progress has been made in rescuing the economy from the risk of economic collapse that looked all too real six months ago."
Summers' address comes days after the US deficit passed the $1 trillion mark for the first nine months of the fiscal year.
But he said that sharp rises in inflation were unlikely, given that the labour market and manufacturing industry are sagging.
"Given lags in spending and hiring, the peak impact of the stimulus on jobs was expected not to be achieved until the end of 2010"
Lawrence Summers, head of the National Economic Council
"The greatest risk to future US deficits would be uncontrolled economic contraction in the United States," he said.
The Obama administration has faced criticism in the last few weeks over the rise in unemployment across the country.
The stimulus package, which was signed by Obama in February, was aimed at creating or saving jobs but the US unemployment rate reached 9.5 per cent in June – its highest level in 26 years.
The stimulus package will not have a dramatic effect in reducing unemployment until next year, Summers argued.
"Given lags in spending and hiring, the peak impact of the stimulus on jobs was expected not to be achieved until the end of 2010," he said.
Nonetheless, some analysts contend that the rise in the number of people losing their jobs is a sign that the stimulus plan is not working.
The US economy must be more export-oriented in future if a future economic crisis is to be avoided, Summers said.
A focus on consumer spending and the use of complex financial tools that have been blamed for contributing to the current economic crisis must end, he said.