Thread: Obama Small Business Tax Proposal

Curious what will happen now, are republicans going to vote for the bill or try to stall it? I can't see them wanting to give Obama a victory on something, especially when they are poised to get a ton of seats picked up (supposedly). But if they stall it then it is perfect attack ad material. While the policy is probably good, it does seems like more of a screwed political play

http://content.usatoday.com/communit...?csp=obnetwork

Originally Posted by Richard Wolf

For days, White House aides have dribbled out the details:

Allowing businesses to write off 100% of their new capital investments through 2011, to spur spending and job creation now. Estimated savings over two years: $200 billion. Net cost over 10 years: $30 billion.
Permanently extending the tax credit for research and development. Cost over 10 years: $100 billion.
Spending $50 billion to build roads, railroads and runways, and creation of an "infrastructure bank" to fund national and regional projects.
All told, the three measures carry a $180 billion price tag, though the up-front cost would be closer to $350 billion.

Originally Posted by deathgodusmc

I like my idea better. Keep the damn money and see if you can jump start the economy by letting business off of the matching payroll and works comp crap. Maybe the companies will actually start hiring again and put money in the hands of people to spend on their crap.

Businesses won't spend not because they are getting taxed, it's because by definition a business needs to borrow money in order to grow (no amount of tax cuts will allow a business to not have to borrow money for capital expenditures), and the interest rate is still not low enough for business lending (hence Obama's business lending bill) BUT since the money supply just isn't there in the economy, nobody can trust that business will pick up so they don't want to take the risk and the added debt service. (Businesses need to grow in order to start hiring). You can't use tax cuts to reallocate liquidity because the right now, the people who will have taxes cut won't spend them anyway. We saw the shift back in 2009, after everyone blamed the "average american" for upspending their credit lines and adjustable mortgages, everyone finally learned to start paying off personal debt, saving up for hard times, etc etc. Once you're in economic depression mode, cash is KING. Without it you have downward spiral, the only way to recover is cash injection. With a really frozen liquidity pool, any reallocation by tax policy from businesses back to individuals is the least effective mechanism to generate movement because essentially you are playing a zero sum game. There are 2 ways to successfully to inject money into the system: 1. use the Fed to lower interest rates. But interest rates are 0 in terms of bank-to-bank lending, so there is no "money from thin air" (really, the spread) to be created. So you are left with the second choice: government deficit spending. Which is basically printing money and giving it to people. Which we can do; every serious investor continues to bail out of their bond/stock market and buying up US treasuries, demand is high enough that the treasury yield is also down to 2%; basically signifying that bond investors think pretty much everything is junk except for US govt.

Really, we're stuck in this situation because Obama didn't spend enough the first time, not because he overspent. Screaming about the deficit is a total red herring that the Republicans are using "to be different from the other guy". Not to mention, they're the ones who like to expand the military spending, except that increasing current military spending can only create jobs by actually making people join the army or going to work for defense contractors. And you are only going to get increased defense contractor jobs if you are actually ordering weapons and such. The cost of the two wars has been mostly steady state from an annual standpoint, so you have no growth potential there. And not everyone is going to run off to hang out in Afghanistan. So.... to solve unemployment first, you're going to have to get the unemployed doing something, like fixing roads and building stuff (digging ditches). Notice how the uemployment was getting better due to census workers? Well problem is that was like 1 quarter's worth of temp employment, which basically barely registers during normal economic cycles (like the impact of when teenagers get summer jobs basically); it wasn't enough to keep a sustained money flow from consumer to business and back.

During his campaign, Obama talked about (and was chastiszed by the right for) some sort of service corps for young people that wasn't military. It sounded very peace-corpy/civilian conservaton corps style stuff. That's really what we need right now, something like that. Another method might be to have govt subsidize more technical-skill college/continuing education for uemployed people, but that would have to be like a multiyear thing, as the immediate effects would not be felt. But at least you could spend the money to send them to school and retrain them. Apparently there are unique businesess that apparently can't find qualified people; the job market needs to be realigned; and the wages need to price fixed (via subsidies) so that a guy on unemployment can get motivated to retrain while being able to make more than what he's getting on uemployment alone.

Those improvements or new projects help make the local economies become more efficient. Which is exemplified in more or larger tax receipts.