Barack Obama, US president, is on Wednesday expected to announce a package of new measures to boost the supply of credit to small businesses still facing a credit squeeze in spite of the improvement in financial markets.

An administration official said Mr Obama would ask Congress to raise the cap for government-backed small business administration loans and propose using troubled asset relief programme bail-out funds to help local banks lend to small businesses.

The small business credit push is part of what may ultimately become a new batch of targeted interventions that aim to accelerate the recovery and speed the decline in unemployment.

Administration officials are exploring whether it is possible to devise a way to subsidise job creation cost-effectively through tax credits.

Meanwhile, legislators on Capitol Hill are trying to figure out how to support the housing market when the $8,000 tax credit for new homebuyers expires, while also moving legislation to extend unemployment benefits.

Sceptics say that the ideas under consideration amount to a “second stimulus”. But officials generally view potential next steps as targeted measures rather than an overall effort to boost demand in the economy.

The focus is on jobs. With unemployment currently forecast to be above 9 per cent at the end of 2010 – when the administration’s congressional allies face mid-term elections – officials are desperate to bring forward the turnround in the labour market.

Small businesses generate a majority of new jobs in the US. But unlike big businesses that can tap capital markets directly, they have not benefited very much from easing strains in wholesale financial markets and still face a bank credit squeeze that deters hiring of new employees.

Republicans on Tuesday hit back with claims from John Boehner, House minority leader, that healthcare reform was causing small business owners to “sit on their hands”. They called for a small business tax deduction of 20 per cent of income which they said would free up funds to hire new employees.

Administration officials are wrestling with whether it is possible to use tax credits to create jobs without wasting large sums subsidising jobs that would have been created anyway.

But the planning is happening in the context of a record budget deficit which makes Congress – and the administration – unwilling to embark on another spending spree. Any new initiative would have to promise a lot of “bang for the buck” to find its way into law.

On Tuesday the Economic Policy Institute, a leading left-leaning think-tank, came out with its proposal: a $27bn (€18.1bn, £16.9bn) tax credit for businesses to encourage them to expand their payrolls, which it claimed would create 5m jobs.

Dean Baker, another liberal heavyweight as head of the Center for Economic and Policy Research, has also suggested a tax credit. He says his would maximise employment from each stimulus dollar by using a “job-sharing mechanism”.

A congressional Democratic leadership aide said that discussions about new policies were in “a very preliminary stage”. “It’s good for those ideas to start floating out there, but I wouldn’t characterise any one item as being under serious discussion at this point,” the aide said.