Government can create jobs. That's why the Census has accounted for an overwhelming percentage of 2010 job growth. But it can't "create" private sector jobs any more than a dog can give birth to a kitten (to use my colleague Justin Miller's phraseology). All it can do it create the conditions -- such as a payroll tax holiday and income support -- that make private sector growth more likely.
Of course, the government is far and away the biggest employer in the United States -- staffing the military, the postal service, fire stations, schools, museums, the regulatory agencies, the FBI, the National Institutes of Health, parks and numerous other institutions.
Moreover, it is strange to hear the lead economic voice in the Obama administration make a classic small-government argument, particularly as the Obama administration touts its "recovery summer" jobs programs.
This is basically right. But given that the administration has turned away from large scale public hiring, Geithner's quote is defensible. We've been stuck at 9 to 10 percent unemployment for a long time. If Obama went around saying he could create jobs, the reasonable response would be: Well why aren't you? Are you busy? Are you heartless? Are you inept? Are you waiting for a more convenient time? Honesty is the better policy, even when it requires powerful government officials to utter the hardest two words in politics: I can't.