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Obama to back company tax breaks | Obama to back company tax breaks |
(40 minutes later) | |
President Barack Obama is to back new company tax breaks in a bid to regain the initiative as mid-term polls loom. | President Barack Obama is to back new company tax breaks in a bid to regain the initiative as mid-term polls loom. |
He will lobby Congress - including a blocking minority of Republicans in the Senate - to let companies in the US write off investment costs until 2011. | He will lobby Congress - including a blocking minority of Republicans in the Senate - to let companies in the US write off investment costs until 2011. |
With unemployment stuck at 10% and the economy appearing to slow sharply, the president's Democratic Party could face big losses at the November elections. | With unemployment stuck at 10% and the economy appearing to slow sharply, the president's Democratic Party could face big losses at the November elections. |
On Monday, Mr Obama also called for $50bn of new infrastructure spending. | On Monday, Mr Obama also called for $50bn of new infrastructure spending. |
Officials said the president would announce the latest proposals during a speech in Cleveland later on Wednesday. | Officials said the president would announce the latest proposals during a speech in Cleveland later on Wednesday. |
Last week, the President used a speech on the economy to attack the Republicans' "blockade" for holding up a bill aimed at helping small businesses. | Last week, the President used a speech on the economy to attack the Republicans' "blockade" for holding up a bill aimed at helping small businesses. |
The administration said that the new tax plan would save companies about $200bn over two years. | The administration said that the new tax plan would save companies about $200bn over two years. |
It would also provide an added incentive for businesses to increase investment. | It would also provide an added incentive for businesses to increase investment. |
Federal Reserve chairman Ben Bernanke noted in a recent speech the worrying failure of businesses to increase their fixed capital investment, and the crucial role this would play in sustaining the recovery. | Federal Reserve chairman Ben Bernanke noted in a recent speech the worrying failure of businesses to increase their fixed capital investment, and the crucial role this would play in sustaining the recovery. |
Political games | Political games |
On Friday, the US Labor Department announced that the US economy had lost a further 54,000 jobs, while the unemployment rate rose to 9.6%, from 9.5% in July. | On Friday, the US Labor Department announced that the US economy had lost a further 54,000 jobs, while the unemployment rate rose to 9.6%, from 9.5% in July. |
Yet Republicans have set their faces against any further stimulus spending by the federal government, despite the slowing economy. | |
Some Democrats accuse them of playing games with the economy in the belief that the President will be blamed by the public for the slowdown. | Some Democrats accuse them of playing games with the economy in the belief that the President will be blamed by the public for the slowdown. |
However, many Republicans have said they favour tax cuts - including making all of former President George W Bush's tax cuts permanent. | |
The latest move may be an attempt by Mr Obama to call the Republicans' bluff over tax cuts ahead of the Congressional elections due in November. | |
Recent polls give the Republicans a significant lead over the Democrats. | Recent polls give the Republicans a significant lead over the Democrats. |
Politics vs markets | |
"The White House is missing the big picture," said John Boehner, leader of the Republican minority in the House of Representatives. | "The White House is missing the big picture," said John Boehner, leader of the Republican minority in the House of Representatives. |
"None of its plans address the two big problems that are hurting our economy - excessive government spending, and the uncertainty that their policies... are creating for small businesses." | "None of its plans address the two big problems that are hurting our economy - excessive government spending, and the uncertainty that their policies... are creating for small businesses." |
But despite Republican fears about the size of the US government deficit, markets are still willing to lend to the US Treasury at unprecedentedly low interest rates. | But despite Republican fears about the size of the US government deficit, markets are still willing to lend to the US Treasury at unprecedentedly low interest rates. |
The 10-year US government bond currently trades at a rate of around 2.6% per annum. | The 10-year US government bond currently trades at a rate of around 2.6% per annum. |
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