President Obama calls for investment in economy

U.S. President Barack Obama delivers his first State of the Union address in 2010 at the U.S. Capitol in Washington, DC.

TEXT OF STORY

Kai Ryssdal: The day's big event is the State of the Union address tonight. Opinion polls show voter expectations of what they want from Washington over the next two years are pretty clear: more jobs and lower deficits. But since government job programs cost money, what's a president to do?

Our Washington bureau chief John Dimsdale has our preview of the speech.


John Dimsdale: White House officials say the president will lay out a case for keeping America more competitive in the global economy. He'll ask for investments in education, so companies have skilled workers; investments in infrastructure for moving products and people; and support for jobs in innovative technologies such as climate-friendly sources of energy.

But some economists say all that sounds just like the two-year-old stimulus program that failed to bring down unemployment. And Kevin Hassett, a former economic adviser to Senator John McCain, says the resulting deficits limit what the president can do now.

Kevin Hassett: He's in a very tricky place. But I think all policymakers are. We're in a tricky place because we squandered so much money on government spending the first time around.

Hassett says the best policy now is for the government to simplify business taxes to create incentives for new hiring, and then get out of the way.

Hassett: We don't know if tomorrow's job creation is going to come from small business or big business, multinationals or local firms. And so the only thing we can do is create a tax code that is neutral toward all these things. Then we'll let the market decide how we're going to grow in the future.

But not all economists worry about too much government spending.

Dean Baker: I wish he wasn't so concerned about the deficit and I wish he would stake out that position.

Dean Baker with the Center for Economic and Policy Research says companies won't hire workers until there's more demand for their products. More favorable tax rates won't change that. He says government, even with huge deficits, is the only guarantee for short term job creation.

Baker: There is a logic to investing. I mean, we're improving the infrastructure, we're investing in modernizing the power grid, in having electronic health records. So much of the stimulus he actually pushed through in 2009 was investment. You know, we could use a lot more of that.

Baker concedes Republicans won't let the president borrow more. Instead, he's hoping the Federal Reserve will keep interest rates low for a long time to allow the economy room to grow. There's a risk of more inflation, he says, but not more deficits.

In Washington, I'm John Dimsdale for Marketplace.

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