While it sounds really nice and definitely has some benefits, community service is only economically beneficial to society as a whole when performed by people who would otherwise be less productive with their time. Too much community service can be a bad thing.
As an obvious example, no one would say that a construction crane operator’s time would be better spent doing community service while an entire construction project waits.
Obama’s plan requiring college students to do 100 hours of community service in exchange for a $4000 tax credit, would in effect be paying college students $40/hr. for their community service. At the same time, it would reduce college students’ involvment in the private sector, where they perform “college jobs” which benefit society more at less cost. It could also slow down their progress toward a degree if they take fewer credits.
The plan to expand Peace Corps could similarly be a less effective use of labor resources. Can someone explain to me what the Peace Corps does that is so valuable? From what I have heard anecdotally, a ton of money is wasted because many young adults enter the Corps as a way to travel the world and put off entering their careers.
As far as the middle school service in exchange for federal money idea, it is arguable that middle schoolers’ time could be better spent perfoming community service than playing video games. My guess is that Obama thinks this would be a great way to have a minor leagues for community organizers. I’m not sure, though, how diverting school resources and energy to a program like this would help raise test scores.