Obama plans tax relief for business spending to boost growth

President Barack Obama this week is proposing to expand tax relief for businesses and boost federal spending on the nation’s transportation system to help bolster an economy that’s losing jobs heading into the November congressional elections.
Obama tomorrow will announce an expanded tax incentive to encourage business investment, an administration official said on condition of anonymity. Obama also will urge Congress to extend permanently and expand a research-and-development tax credit for businesses, costing about $100 billion over a decade. He began the rollout of initiatives yesterday in Milwaukee, calling for $50 billion in the first of a six-year program to fix roads, railways and runways and modernize the air-traffic control system.
“All of this will not only create jobs now, but will make our economy run better over the long haul,” Obama said, announcing his public-works program. “It’s a plan that history tells us can and should attract bipartisan support.”
Elections in less than two months to decide U.S. House seats and about a third of the Senate are focused on unemployment near 10 percent and a budget deficit swelled by the government’s financial-system bailout. Obama is traveling this week to Midwestern states where joblessness is hurting some Democratic candidates’ chances of getting elected.
Tight Calendar
Obama’s proposals, many of which he has introduced before, will run up against a tight congressional calendar and election- year politics. The Senate is scheduled to return to Washington Sept. 13, and the House reconvenes the next day. Lawmakers will be at work for about three weeks before leaving again to campaign for the Nov. 2 elections.
At an event tomorrow in Cleveland, Obama will propose allowing companies to fully deduct the cost of purchasing equipment such as tractors, wind turbines, computers and solar panels, the official said.
In 2008 and 2009, companies could deduct 50 percent of their costs using so-called bonus depreciation. The latest proposal would increase the tax break to 100 percent through the end of 2011 and would make it retroactive to Sept. 8, 2010, the official said. The bonus depreciation measure would cost $30 billion over 10 years. It and the proposed permanent extension of the research tax credit have garnered the support of the business community.
Every president since Bill Clinton has backed a permanent extension of the research tax credit, which Congress extends only temporarily because of its high cost.
‘Infrastructure Bank’
Speaking to union members and their families on the Labor Day holiday in the U.S., Obama called for an “infrastructure bank” and requested money to rebuild 150,000 miles (241,400 kilometers) of roads, construct and maintain 4,000 miles of rail and overhaul 150 miles of runways.
Senate Republican Leader Mitch McConnell, of Kentucky, responded in a statement that the “latest plan for another stimulus should be met with justifiable skepticism,” and “Americans are rightly skeptical about Washington Democrats asking for more money.”
The Obama administration will work with Congress to ensure the rebuilding plan is fully funded, and a “significant portion of the new investments would be front-loaded in the first year,” the White House said in a statement. The spending “will not add to the deficit over time,” Obama said.
2011 Hiring
The program will focus on long-term modernization of transportation systems and create jobs starting in 2011, an administration official said yesterday. The White House will propose to pay for the new spending by eliminating tax deductions for oil and gas companies, the official said.
Republican economists were skeptical about whether rebuilding roads and other such spending was the best way to help the economy rebound.
“Infrastructure programs are always popular for stimulus talk but disappointing in practice,” Douglas Holtz-Eakin, president of the Washington-based American Action Forum and a former adviser to the 2008 presidential campaign of Senator John McCain, a Republican from Arizona.
Holtz-Eakin also questioned whether Congress will agree to more spending, given signs of growing voter opposition to a deficit that the Congressional Budget Office estimates will reach $1.3 trillion in the fiscal year ending Sept. 30, near last year’s record shortfall of $1.4 trillion.
‘Politics’
“The ratio of politics to substance in this effort is infinite,” Holtz-Eakin said.
Obama’s remarks to members of the AFL-CIO, the largest U.S. labor federation, came as he’s faced with the prospect of Democrats losing control of Congress. The nation is struggling to recover from the worst recession in more than six decades and recent economic reports have been mixed.
Last week’s jobs report showed that private payrolls climbed 67,000 in August, more than forecast, easing concerns that the world’s largest economy is sliding back into a recession. Even so, overall employment fell by 54,000, and the unemployment rate rose to 9.6 percent from 9.5 percent as more people entered the labor force.
Construction jobs in the U.S. have declined by 940,000 since Obama took office in January 2009, even after a 19,000 gain in August.
Peoria, Illinois-based Caterpillar Inc., the world’s largest construction-equipment maker, said last month it may add as many as 9,000 workers worldwide this year as sales climb in developing markets. Caterpillar shares have risen more than 50 percent in the past year.
To contact the reporter on this story: Julianna Goldman in Milwaukee at jgoldman6@bloomberg.net Lisa Lerer in Washington at llerer@bloomberg.net

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