U.S. President Barack Obama is proposing increased stimulus spending aimed at job creation.

He asked Congress on Tuesday to approve a three-part program, much of it aimed at small business.

U.S. President Barack Obama wants $200 billion in unused funds from the TARP program used for job creation. (Canadian Press)

Obama said staggering job losses mean the country must continue to "spend our way out of this recession" with a round of new incentives. The U.S. unemployment rate is 10 per cent.

His program includes a one-year elimination of capital gains taxes, deductions for up to $250,000 in investment and increased deductions for capital spending, all aimed at small firms. The program would also provide tax incentives for firms that create jobs and easier terms for borrowing.

Obama also called for increased spending on roads, bridges, and other infrastructure and incentives for homeowners who retrofit their properties to use clean energy or become more energy efficient.

Obama wants to fund the initiatives with $200 billion in unused funds from the Troubled Asset Relief Program. TARP was set up in 2008 to shore up the balance sheets of banks and mortgage lenders.

Obama said it is a "false choice" to claim that the government must pick between paying down the deficit and investing in economic growth. He said spending in the short-term to create new jobs will help reduce the deficit over the long-term.

With files from The Canadian Press