I applaud Obama for thinking how to get people off the unemployment rolls (although I quibble about the details of his plan). We are in a downward spiral because we have fewer and fewer producers, which means the overall gross national income falls because too many people suck the economic life out of the GDI (gross domestic income). Fewer spenders, less demand for goods and services, fewer workers, even fewer spenders, continued dropping demand, and you circle the drain. Put a stopper in the drain, and you will see demand rise, more workers, more spenders, and we're back on a growth path.
Government isn't the engine. The country is the engine -- ALL of the country. And the sooner we get more people paying taxes because more people are employed, the better. The USA used to be the country that works because its citizens were workers. That isn't true today.
Maybe the right thing is to start whittling at the salaries of the people in Congress, including pension benefits. Whittle at the salaries in the White House, too. Tie their earnings and their payouts to results, like stockholders are now doing to CEO pay.
The state level? There, too.
The only problem? As the US has offshored (outsourced) jobs over the last 40+ years, the Government stepped in to pick up the slack. That was the easy, popular thing to do, but it was also a vicious cycle. We are close to the tipping point now, and may even be over it. Unfortunately, the current generation of Politicians is too timid to break this pattern for a whole host of reasons, including social unrest. In fact, most politicians (including Obama) daydream how to create more clients. At this point, its impossible to seperate the financial from the political from the entitlement state—they are all part of one big, overheating machine. It will probably take a collapse of the whole system (worldwide, not just the US) to change things. The next 20 years won’t be pretty.