Deficit reduction, debt reduction should be part of an overall package for job growth over the long term. It is not the only part of it, but it is an important part of it...If there are steps in the short term [that] may reduce the amount of cash in the treasury but in the long term mean we are growing at 3.5 percent instead of 2.5 percent, then those ideas are worth exploring,
He is arguing we should spend to reduce our debt because of effects on future growth rates. This is all from the magic of the multiplier, where investments that would be wasteful in the private sector have a positive NPV in the public sector. This makes sense to most modern macroeconomists and they provide the intellectual cover for those who don't understand it but want it to be true. Economists have changed Adam Smith's dictum 'what is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom' to 'what is foolish for a family is wise for our government.'
I regret wasting time learning the formal casuistry that rationalizes the pedestrian and perennial desire to increase redistribution and federal power under the pretext of increasing growth. I know it's a defensible statement, not logically impossible just contingent on some heroic assumptions, but when you look at how our money is actually spent, empirically absurd: defense spending, K-12 education, ethanol, light rail, Medicare, all boondoggles that have made things worse via their top down direction. Meanwhile, Japan cleans up its disasters much more efficiently than the US would have (see Katrina), and where in 1931 the US could build the Empire State Building in 400 days, the World Trade Center is at 10 years and counting. At this rate we are declining much faster than when Egypt built the monumental pyramids at Giza around 2600 BC, then the pathetic Unas 300 years later (my grandkids will probably think the Hoover dam was made by alien astronauts).
Obama's basically has the same homunculus in his head he had in 1994 while criticizing the infamous Bell Curve on NPR, when in one of his few public comments made before becoming a professional narcissist, he made the familiar call to more spending:
Real opportunity would mean quality prenatal care for all women and well-funded and innovative public schools for all children. Real opportunity would mean a job at a living wage for everyone who was willing to work, jobs that can return some structure and dignity to people's lives and give inner-city children something more than a basketball rim to shoot for. In the short run, such ladders of opportunity are going to cost more, not less, than either welfare or affirmative action. But, in the long run, our investment should payoff handsomely. That we fail to make this investment is just plain stupid.
As Lao-Tsu said, 'at the center of your being you have the answer; you know what you want'. The rest, is formal education.