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By JIM KUHNHENN and CALVIN WOODWARD
Associated Press Writers

WASHINGTON (AP) – In President Barack Obama’s hands, the $700 billion financial rescue fund offers a bit of bookkeeping magic: an opportunity to pay down the deficit while also spending more – thereby adding to it.

Under law, any paybacks to the bailout known as the Troubled Asset Relief Program must be used to reduce the deficit. But in an economic speech on Tuesday, the president sought to have it both ways. Increased repayments from banks to the Treasury will reduce the deficit all right, but it will give Congress the budgetary room to spend more – and the president encouraged just that.

“There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other,” Obama said. “But this is a false choice.”

To be sure, governments spend money during recessions to prime the economy, and they must be wary not to pull back too soon or to spend too long. But TARP returns are required by law to be used for deficit reduction. Yet if banks can help lower the deficit through one program, Congress can bump it up elsewhere.

What’s more, even under Obama’s rosier expectations the $700 billion TARP would still add $141 billion to the deficit.

It wasn’t the president’s only attempt at having his cake and eating it, too, in his speech.

OBAMA: “We were forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it over to others to solve,” he said, describing his administration’s infusions of money to banks and the auto industry.

Later, however, he conceded that the TARP program was “launched hastily under the last administration,” and argued the policy was flawed.

THE FACTS: Obama’s partisan swipe glosses over some of the circumstances before he took office. First, he and his fellow Democrats presided over some of the decision-making that led up to the crisis, because they controlled Congress for two years before Obama became president. Obama’s Treasury Secretary Tim Geithner also had a hand, as chief of the Federal Reserve Bank of New York under the Bush administration.

Moreover, the $700 bailout fund was initiated under the Bush administration by then Treasury Secretary Henry Paulson. It was endorsed at the time by Federal Reserve Chairman Ben Bernanke and by Geithner. As Illinois senator during the presidential campaign, Obama backed that package.

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OBAMA: “Finally, we are no longer seeing the severe deterioration in the job market we once were; in fact we learned on Friday that the unemployment rate fell slightly last month. This is welcome news, and news made possible in part by the up to 1.6 million jobs that the Recovery Act has already created and saved, according to the Congressional Budget Office.”

THE FACTS: How many jobs were created or saved by the $787 billion economic stimulus that Congress approved in February has been one of the most contentious questions facing the Obama administration. Recipients of direct assistance from the government say they have created or saved about 650,000 jobs, though some of those calculations have been questioned.

The Congressional Budget Office was much more circumspect than Obama’s characterization. The stimulus policies, CBO said last month, “raised real GDP by between 1.2 percent and 3.2 percent, lowered the unemployment rate by between 0.3 and 0.9 percentage points, and increased the number of people employed by between 600,000 and 1.6 million compared with what those values would have been otherwise.”

And CBO offered numerous caveats about its numbers, noting “it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package.”

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OBAMA: “We cannot continue to accept an education system in which our students trail their peers in other countries.”

THE FACTS: The long-held perception that U.S. pupils lag those in other countries has been based on misleading comparisons, and is getting outdated in any event. Developed Asian countries do tend to be ahead, but the U.S. has been gaining for many years, making bigger strides on international tests than Singapore and Japan in math, and more progress than Japan in science. The U.S. is highly competitive with Europe, including Britain, Russia and Germany. Global assessments do not account for the fact that U.S. is growing ever more diverse, with a large share of children who are learning English.

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Associated Press writer Libby Quaid contributed to this story.