Faced with pre-election polls showing strong Republican support leading up to the mid-term elections in November, President Barack Obama is floating a $350 billion stimulus package designed to assuage the fears of troubled homeowners and create jobs.
In another move aimed at stabilizing a shaky economic recovery, the president today (Wednesday) will officially unveil a new $200 billion tax cut that gives businesses across the country incentives to buy new equipment, an anonymous administration official told CNN.
The proposal would be in addition to a $100 billion permanent extension of the business tax credit for research and development, as well as a $50 billion 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."
The proposals reflect a growing fear among Democrats in Washington that the Republicans in November will take back control of the House of Representatives and possibly the Senate. However, Robert Gibbs, Obama's chief spokesman, told Bloomberg News the administration's latest economic initiatives are geared toward putting the economy on more solid footing and not swaying voters.
"This is about long-term economic growth," Gibbs told Bloomberg, "not the next 60 days, or 90 days."
With less than two months remaining before the elections, voters are focusing on an unemployment rate near 10% and ballooning budget deficits after an unprecedented bailout of the financial system. Obama is visiting Mid-western states this week where economic issues are threatening to claim the seats of some prominent Democratic candidates.
At an event today 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.
The latest proposal bumps the deduction to 100% from its current 50% through the end of 2011 and would be retroactive to Sept 8, 2010. The so-called 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.
At a gathering of union members on the Labor Day holiday in Milwaukee, Obama announced plans for an "infrastructure bank" which would fund repairs and rebuild 150,000 miles of roads, build 4,000 miles of new railways and repair 150 miles of airport runways.
Obama's proposals will face tough sledding as they try to overcome both Republican opposition and a tight congressional calendar. 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.
Senate Republican Leader Mitch McConnell, R- KY, said 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 White House fired back with a statement saying the administration will work with Congress to ensure the infrastructure program is fully funded, and the spending "will not add to the deficit over time," Obama said. The statement added that a "significant portion of the new investments would be front-loaded in the first year," Bloomberg reported.
The program will focus on modernizing transportation systems and creating jobs starting in 2011. 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 expressed doubt that rebuilding roads and other infrastructure spending is the best way to re-ignite the recovery.
"Infrastructure programs are always popular for stimulus talk but disappointing in practice," Douglas Holtz-Eakin, president of the Washington-based American Action Forum told Bloomberg.
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.
The White House has decided to abandon a broad-based payroll-tax holiday at this point, officials said. That proposal, which had been part of earlier discussions with key congressional officials, would have been an expensive measure, potentially costing hundreds of billions of dollars.
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