Obama splits the difference on job creation

President Obama's latest economic proposals for job creation are... well, so Obama. So measured. Part jobs growth, part deficit reduction. Part supply-side economics, part Keynesian. But the parts may not add up to all that much.

The White House says it has $200 billion worth of fiscal maneuvering room because the much-maligned federal bank bailout – known as TARP (Troubled Asset Relief Program) – is not going to be nearly as expensive as originally thought.

The federal government hasn't had to spend all of the $700 billion in emergency relief, originally intended to help the reeling financial sector but extended to the broken-down auto industry. Also, banks are starting to pay back the funds, with interest.

Republicans argue that the leftovers should go to deficit reduction (red flag: Moody's Investors Services warned Tuesday about the state of government finances in the United States and Britain). Indeed, the law requires that TARP paybacks be applied to the deficit.

But that could give Congress more room to spend, and Democrats suggest more spending on job growth (forecast: The Federal Reserve says unemployment will hang stubbornly in the range of 9.3 to 9.7 percent next year).

Mr. Obama argued today that job growth versus deficit reduction is a false choice, and he's right. Both are needed. But Americans should be aware that in splitting the difference, there will be less power in each punch.

His proposals are logical enough. He wants to boost private-sector hiring through tax benefits for small businesses – the main generator of jobs.

That's a supply-side approach that shows he was listening to business leaders when they came to the White House for last week's job summit. One wonders, though, what employers will do with the one-year measures Obama proposes, when hiring is a long-term consideration. Another issue: There's a potential for fraud in sweeteners for the hiring process.

He also proposes increased government spending (the Keynsian model) in two targeted areas that are important to America's competitiveness. One of them would provide rebates to help people make their homes more energy efficient ("cash for caulkers"), while stoking "green" jobs. The other would put about $50 billion toward infrastructure – highways, roads, transit, rail, and aviation.

And it's hard to argue that states and struggling Americans no longer need support (he wants to keep the federal tap flowing by extending unemployment and postlayoff health benefits and preventing more state job cuts).

The sprinkled approach – a little here, a little there, a little elsewhere – necessarily means the proposals are more of an economic insurance policy than a big jobs booster. They're also a political insurance policy.

With a stubborn unemployment rate, many Democratic politicians fear for their jobs in next year's midterm elections. The fact that the president has left so much in his proposals for Congress to work out – the cost, the payment, the timing, and the details of the programs – leaves them wide open to pork barrel spending.

Obama has presented a well-balanced package that's worth speedy passage. Americans need to pay close attention as these ideas take shape in Congress.