President Barack Obama’s economic offensive may not charm business or Republicans. The president’s plans to spend $50 billion on roads and railways and grant businesses $300 billion of investment tax credits have merit. But they don’t look enough to sway a disillusioned corporate America already wondering about the fate of $4 trillion in soon-to-expire tax cuts from the Bush years. And the GOP is in no rush to pass a second stimulus before looming midterm elections.
In a less toxic atmosphere, Obama’s ideas would have stronger legs. A national infrastructure bank has long been a favorite of liberal policy wonks and White House advisers. Republicans have been quick to deride the idea as more of the $814 billion stimulus from last year they already consider ineffective. If the bank was structured to reduce taxpayer risk — key elements would include political independence and a focus on revenue-producing projects — the GOP might well go along.
Corporate tax breaks should be an even easier sell. Obama wants companies to be able to deduct 100 percent of the cost of capital investments made in 2010 and 2011 — a tax break worth some $200 billion over two years. Republicans and their corporate contributors have been pushing such an idea as an alternative to more government spending. And while both would prefer a broader tax cut, permanently extending an R&D tax credit, at a cost of $100 billion over 10 years, is a reasonable substitute.
But politics probably will get in the way. Republicans aren’t likely to vote for more spending on infrastructure when doing so would mitigate their criticism of the original stimulus bill, a pillar of their campaign to retake Congress. Nor are they likely to embrace temporary business tax cuts that would be offset by permanent tax increases, such as higher investment and income taxes. Even Democrats may hesitate because of the potentially modest impact on economic growth and employment.
Executives unhappy with the administration have been tossed a bone. They may appreciate the gesture. But it also will be easily lost in an accumulation of bad will from past policy and the uncertain fate of bigger proposals — the Bush tax cuts, the deficit commission and the elections — that could ultimately mean so much more.