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Obama's job summit challenge: creating jobs on a budget

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Some of the participants in the forum will urge Obama and Congress not to worry so much about deficits. Rather, they will argue, the government should spend to create jobs either indirectly through tax incentives that affect private employers, or directly by government spending on roads, green energy, or community service programs.

Their reasoning: Unemployment has become much worse than the White House envisioned when it made the case early this year for a $787 stimulus program. The federal debt is a significant long-run problem, fueled more by healthcare programs than by temporary stimulus efforts. The Treasury's fiscal troubles could actually be made worse, they add, if policymakers fail to get the economy moving.

It's an argument right out of economics textbooks. When the economy is mired in a downturn, the last thing you want to do is focus on reducing budget deficits.

"That’s exactly what happened in 1937," says Scott Lilly, a finance expert at the Center for American Progress, a left-leaning think tank in Washington.

"We went right back into a second depression. That certainly didn’t do anything to restore fiscal balance."

Obama is also hearing a different view on deficits, though. As he toured China recently, he heard from leaders there who want assurance that America will be able to repay the loans China is making, in effect, with its purchases of US Treasury debt.

Some economic research suggests that government efforts to stimulate the economy will be less effective when the government is deeply and chronically in debt.

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