Analysis: Obama urged to lay out bold approach on jobs

WASHINGTON (Reuters) - Democratic allies to President Barack Obama are rallying around a mantra that they say should guide his strategy on job creation: "Go bold."

As Obama puts the finishing touches on a speech next week on his ideas for reviving the jobs market and the economy, he is facing rising pressure from Democrats to push for aggressive measures even if those proposals are likely to be declared dead on arrival by Republicans in Congress.

Supporters are calling on him to steer clear of an overly cautious approach and spell out an economic vision that will frame his argument for re-election in 2012.

"If the administration limits itself to only those proposals that can pass the Republican House, that will shift the package to the right and, frankly, limit the ability of the president to make a clear case for job creation," said Neera Tanden, a former domestic policy adviser to Obama now at the Center for American Progress think tank.

William Galston, a former Clinton administration official now at the Brookings Institution, said there has been a "lack of presidential clarity" about what is needed to address the economy's woes and Obama needed to fix that.

"The president has a duty to propose remedies equal to the scope of the problem and let the chips fall where they may," he said. "People are really hungry for a way out of this morass."

The Democratic clamor for a bold plan could increase if the key monthly jobs report due out on Friday adds to concerns about the health of the sluggish U.S. economy.

Economists are bracing for a lackluster August report. Many said hiring probably took a hit as businesses and consumers were spooked by political wrangling over the debt ceiling, the U.S. credit-rating downgrade and the European debt crisis.

Analysts in a Reuters survey projected a rise of 75,000 in payrolls in August with the unemployment rate remaining steady 9.1 percent. But some economists did not rule out the prospect of an outright decline in employment in August.

VENTING FRUSTRATION

A key dilemma for the White House is figuring out the right balance for the package, which is likely to include new spending on public-works projects such as road and school repair, tax breaks to encourage business hiring and possibly also initiatives to help struggling homeowners.

Dissatisfaction with Obama's leadership on the economy is rising across the political spectrum, pushing his approval ratings to around 43 percent, near the lows of his presidency.

Democrats are increasingly venting frustration with what they view as an overly modest agenda on the economy. Many felt Obama was too deferential toward Republicans during the drawn-out negotiations over the debt ceiling.

But gridlock is probably the most likely scenario for near-term proposals to stimulate the economy.

Republicans favor an approach that is diametrically opposed to the one favored by many Democrats. Republicans reject fiscal steps like infrastructure spending as wasteful and ineffective and have called for shrinking the size of government.

In the face of such a sharp divide, Obama's approach so far has been to push ideas like an extension of tax cuts for wage earners and unemployment benefits that were enacted with bipartisan support last December.

But former officials and other Democrats say Obama must now sketch out something far more ambitious.

"I think they should be proposing something substantially bigger," said Christina Romer, who served as Obama's chairwoman of the Council of Economic Advisers during his first two years in office.

She suggested tying a big near-term fiscal stimulus plan with proposals for aggressive long-run deficit reduction.

"I do understand that it would be difficult to get something big and bold like that through Congress. But it seems to me it's the right economics, and probably the right politics," Romer said.

Public works spending proposals formed a big part of the $800 billion stimulus package Obama pushed through Congress in 2009, an initiative that Republicans contend added to the deficit without meeting promises that it would bring down unemployment.

Tony Fratto, a former aide to President George W. Bush, said Republicans could support a "bold" package but that would depend on what it included.

He said the "classic Keynesian" ideas like infrastructure spending and even short-term payroll tax cuts probably would not yield the kind of economic boost Democrats hope for.

Fratto said broad tax reform would be one ambitious idea that could encourage investment and bolster growth.

In remarks on Monday announcing labor expert Alan Krueger as his pick to become the new head of the Council of Economic Advisers, Obama signaled that infrastructure spending was part of the mix of steps he would offer.

He said he wanted to "put more money in the pockets of working families and middle-class families, to make it easier for small businesses to hire people, to put construction crews to work rebuilding our nation's roads and railways and airports."

(Additional reporting by Laura MacInnis and Jason Lange; Editing by Eric Beech)