Obama's Jobs Plans: Would They Really Work?

Economists weigh in on how realistic the president's jobs proposals are.

ByABC News
January 28, 2010, 9:58 AM

Jan. 28, 2010 — -- President Obama said at his first State of the Union address last night that jobs must be the U.S.'s top priority this year and, accordingly, he spoke of several proposals designed to beef up employment in a country where one in 10 workers no longer receives a paycheck.

But critics say that among Obama's proposals -- some of which were included in a $150 billion House jobs bill passed by the body last month -- some are more realistic than others. Below, ABCNews.com takes a look at the president's plans and where, some say, they fall short.

$30 Billion From Repaid Troubled Asset Relief Program Funds to Community Banks for Small Business Lending

With the credit market still tight for small businesses, expanding lending to them would allow for more hiring, supporters say.

The money could be spent, specifically, for loan guarantees that the Small Business Administration provide to banks to ensure that they don't lose money when they lend to small businesses, said Gus Faucher, the director of macroeconomics at Moody's Economy.com. (The House jobs bill includes $354 million for SBA loan guarantees.)

"It's an area that would be helpful in getting job growth again," Faucher said.

But John Schmitt, an economist at the progressive Center for Economic and Policy Research, said that extending more loans to small businesses may not have as big an impact as some might hope. While a lack of credit is clearly a problem for small businesses, he said, a much bigger problem they face is a lack of customer demand.

"Without demand in the economy for the goods and services of small business, the availability of credit is just not sufficient," he said.

Former Treasury Secretary Paul O'Neill says many questions remain about how the government could actually measure an increase in credit availability to small businesses.

"How will we be able to see and measure incremental credit availability to small businesses? How much credit availability currently exists for small businesses? Are there credit worthy businesses that are being turned down?" he asked in an e-mail to ABCNews.com. "Credit worthy means there is a high probability the borrower will pay back the loan in the agreed time with the agreed interest payment. How will the community banks be selected to receive the incremental money? How long will it take to get this money into the system?"

O'Neill took issue with Obama's contention that the money used for the $30 billion program will be that which "Wall Street banks have repaid" through the Troubled Asset Relief Program, also known as the bank bailout.

"Since we are in a deep deficit hole this is more borrowed money. The President implied this was available money because the banks had paid it back this is an accounting fiction I hope the President knows better than what he inferred," he said. (For more on what O'Neill had to say, click here.)