Obama's Rural Job Creation Plan May Simply Shift Resources

VIDEO: President travels to Illinois, announces speech on jobs.
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President Obama announced new economic initiatives the administration said will help create jobs in rural areas, but economists say any gains may be minimal and might even displace jobs in metropolitan areas.

Obama announced hisrural jobs initiatives plan, at the White House Rural Economic Forum in Peosta, Iowa, on Tuesday, as part of his bus tour of the Midwest.

He will announce the specifics of a wider jobs plan in September.

The rural plan includes doubling the U.S. Small Business Administration investment funds for rural small businesses over the next five years and launching a series of Rural Private Equity and Venture Capital conferences nationwide.

It also will expand Department of Labor and USDA jobs search and training information at 2,800 USDA field offices, increase rural physician recruitment and expand health information technology in rural hospitals and clinics.

"America is going to come back from this recession stronger than before," Obama said in Iowa. "And I'm also convinced that comeback isn't going to be driven by Washington. It is going to be driven by folks here in Iowa. It's going to begin in the classrooms of community colleges like this one. It's going to start on the ranchlands and farms of the Midwest, the workshops of basement inventors, and storefronts of small business owners."

ABC News asked three economists to weigh in on the first look at the plan.

"They're worth doing, but very tiny compared to the size of the problem we face: the huge shortfall in consumer demand and unwillingness of business to create enough jobs when consumers aren't able to buy," Robert Reich, a professor of public policy at the University of California, Berkeley, said. "The White House must do more than come up with policy miniatures."

Stephen Bronars, senior economist with Welch Consulting in Washington, D.C., said the "modest" proposals are likely to do no harm and may have a small benefit for the job situation in rural America. He said hosting conferences between private investors and rural start-ups is the "best idea" of those announced.

"We know that start-ups and small businesses will create many jobs as the economy recovers," Bronars said. "I like the idea that private investors and venture capitalists, rather than government bureaucrats, will decide which of the many small businesses have the best ideas and opportunities for growth."

Bronars also said the allowing citizens to access Labor Department job search information at field offices could be beneficial, but the key question is whether applicants' skills will match the positions for which employers are hiring.

Economists would have difficulty estimating the number of jobs created from the preliminary plans. Bronars warns that targeting job creation in rural areas could potentially displace a job in another area of the country.

As part of the plan, the Department of Health and Human Services will modify the National Health Service Corps loan repayment program to allow more than 1,300 small, rural hospitals to recruit new physicians.

The White House estimates that the addition of one new primary care physician in a rural community generates $1.5 million in annual revenue and creates 23 jobs annually. The average critical access rural hospital creates 107 jobs and generates $4.8 million in payroll annually.

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