If enacted, the holiday would allow U.S. corporations to bring home profits they stashed overseas at a much lower rate - about 5% as compared to the usual 35%.
If enacted, the holiday would allow U.S. corporations to bring home $1.2 trillion in profits they have stashed overseas at a much lower rate - about 5% as compared to the usual 35%.
Many large multinationals, particularly those in the health and tech sectors, say the tax holiday would be the equivalent of a "free" stimulus package: the government would recover tax revenue while the companies would have more money to invest in job creation, factories, equipment, and research and development.
Of course, corporations fed most of the booty from a 2004 tax holiday back to shareholders in the form of dividends and stock buybacks.
But that's not what the multinationals want Washington to hear. They've formed a coalition to lobby the job creation/investment angle on Capitol Hill while using the weak economy as an ally.
That's the argument I make when I urge Americans to search for investments outside U.S. borders. Ironically, your money doesn't have to travel all that far: What's arguably the world's "safest economy" is actually located just north of the border.
I'm talking, of course, about investing in Canada.
Indeed, the true aim of Obama's new stimulus is to put Republicans in a difficult position.
"The president has changed the conversation from whether to renew or terminate President Bush's tax cuts to his own tax-cut agenda, and is promoting a couple of business-friendly proposals that Republicans have previously promoted," David Wessel wrote in The Wall Street Journal. "So Republicans either oppose them, and look hypocritical, or back him: a win-win for Democrats."
Obama's new proposals employ a front-loaded approach with tax cuts to spur business spending and infrastructure projects to promote job creation.
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.
Standard & Poor's Case-Shiller Home Price Indices yesterday (Tuesday) reported that home prices rose 3.6% in the second quarter from a year earlier - but the boost came from the homebuyer tax credit that expired in April. And that doesn't bode well for the housing market's near-term outlook.
"The numbers were inflated by the homebuyer tax credit," David Sloan, a senior economist at 4Cast Inc. in New York, told Bloomberg. "The numbers will be going down in the coming months. We could see some significant declines."
Their latest move was announced Sunday when Housing and Urban Development Secretary Shaun Donovan said the White House plans in the next few weeks to set up an emergency loan program for the unemployed and a government mortgage refinancing effort.
Despite all the monetary and fiscal firepower the U.S. Federal Reserve and the Treasury have deployed, economic growth has slowed to an agonizing pace. The slowdown has hit the housing market particularly hard, as evidenced by home sales that dropped to record lows in July.
Prime Minister Naoto Kan detailed a plan to implement a new stimulus program by the end of September, and the Bank of Japan announced after an emergency meeting that it would introduce new loan programs to encourage bank lending to consumers.
The yen has climbed more than 10% against the dollar since May, last week hitting a 15-year high of 83.60 per dollar and threatening Japan's export-driven economic recovery. Analysts were skeptical that the moves would do anything to change the currency value or stimulate the stagnant recovery, and said the measures are largely a political attempt to pacify Japanese consumers instead of actually halting the yen's rise.
"Railroads were always the pride of America, and stitched us together. Now Japan, China, all of Europe have high-speed rail systems that put ours to shame," Obama said last year announcing his plan.
While most passenger trains in the United States travel at the maximum allowable speed of 79mph, trains in Europe and Asia typically travel in excess of 125mph. In France, for example, the Train Ga Grande Vitesse (TGV) travels at an average speed of 133 mph. Another French train actually reached 357.2mph in 2007, setting a new world record.
The Bank of Korea (BOK) joined counterparts across Asia by notching its rate up by 0.25 percentage point to 2.25%, lifting its key policy rate for the first time since August 2008 - the beginning of the global financial crisis.
But the BOK stressed it is just nudging rates up from emergency levels to counter the threat of inflation and curb a rise in household credit. Asia's fourth-biggest economy joined other economies during the global financial crisis by slashing interest rates, knocking them down three times and shaving a total of 325 basis points off the benchmark rate.
Catalyst for the latest spasm of selling came from disappointing news on durable goods sales and initial jobless claims, and weak earnings news or outlooks from consumer-facing companies Bed Bath & Beyond Inc. (Nasdaq: BBBY), Darden Restaurants, Inc. (NYSE: DRI), Lennar Corp. (NYSE: LEN) and Nike, Inc. (NYSE: NKE).
All of the major U.S. and global indexes are now below their 200-day averages for the first time since early June.
Greece, Portugal and Spain - three of the so-called "PIGS" - have to do so, of course. But Germany - generally reckoned to be in excellent shape - is also cutting its deficit, as is France, which hasn't run a budget surplus in 40 years. Britain, too, with no need to protect the euro (it's not a Eurozone member) just introduced a budget that cut the deficit by $140 billion over four years.
U.S. President Barack Obama and other Keynesians warn that Europe may push its own economy - or even the global economy - back into recession.
But here's the surprising reality: Europe may gain from its fiscal pain - and its deficit-trimming actions offer the best hope for a lengthy recovery.
Still, the simple fact that there are a few economic boogey-men lurking behind each suspect piece of data doesn't mean that investors should run screaming away from stocks.
In fact, if you take the time to listen to the opposite point of view before you make up your mind about the direction the economy is headed, you might be pleasantly surprised.
For details of the two stimulus-plan safety plays, read on...
That's the question investors have been asking since U.S. stocks essentially bounced off of their March 2009 post-crash lows - only to be launched into one of the strongest rallies in U.S. market history.
More than a year later, U.S. investors still don't know what to believe - or what to expect, says Jon D. Markman, a market commentator and best-selling author who is also a Money Morning contributing writer. The most recent sentiment poll by the American Association of Individual Investors, or AAII, showed that only 41% of investors are bullish. Cash flows at mutual funds that invest in U.S. stocks are telling a similar story, with a $5.1 billion monthly outflow, Markman says the most recent data shows.