President-elect Obama on Tuesday said his budget chief predicts that the national deficit could reach $1 trillion before the next budget is proposed, but argued that spending more is necessary to “jumpstart” the economy.

Obama told reporters that Peter Orzag, his incoming Office of Management and Budget director, made that prediction. The president-elect added that a $1 trillion deficit could be the reality for years to come even as his administration starts working with Congress on an economic recovery package.

“We’re going to have to stop talking about budget reform,” Obama said after a meeting with his economic team. “We’re going to have to embrace it. It’s an absolute necessity.”

Obama promised that the passage and implementation of his proposed stimulus package, which is estimated to cost well over $700 billion, will have the highest level of transparency and oversight.

The president-elect argued that his economic recovery and reinvestment plan is necessary to right the economy.

“But we’re not going to be able to expect the American people to support this critical effort unless we take extraordinary steps to ensure that the investments are made wisely and managed well,” he added.

To that end, Obama said he will seek a ban on all earmarks in the stimulus package and push the creation of a new oversight board.

The president-elect also stated that he will look to rein in the federal budget by, among other things, forcing the government to “make tough choices and break bad habits.”

Obama was asked about reports of his choice of former White House chief of staff and ex-Rep. Leon Panetta (D-Calif.) to head the CIA, a possible decision that has drawn fire from some Democrats who question Panetta’s intelligence experience.

Obama said he has “the utmost respect” for Panetta, but the president-elect cautioned that no announcements have been made.

“When we make the announcement, I think what people will see is, is that we are putting together a top-notch intelligence team that is not only going to assure that I get the best possible intelligence unvarnished, that the intelligence community is no longer geared toward telling the president what they think the president wants to hear, but instead are going to be delivering the information that the president needs to make critical decisions to keep the American people safe,” he said. “You’ll also see a team that is committed to breaking with some of the past practices and concerns that have I think tarnished the image of the agencies, as well as [our] foreign policy.”

Obama, who has been criticized for not speaking out more vocally about the conflict between Israel and Hamas, again did not wade too deeply into the issue but stated that he is “concerned” about the fighting and is monitoring the situation daily.

He added that his administration would follow through on pledges that he made during the campaign to try and solve tensions in the Middle East.