Obama Announces New Proposals for Employment and Growth
Yesterday, the President announced two new plans for economic growth. Responding to pressure to deliver more job creation in a critical election year, Obama announced a plan to spend $50 billion next year on transportation and infrastructure—from roads to railways to airports. The proposal also includes plans for the creation of a national ‘infrastructure bank’ to attract private funding for further infrastructure improvement projects. If approved, this $50 billion in spending would be the first part in a six-year series of infrastructure spending bills, supposedly to be paid for by an increased tax on oil and gas companies.
Additionally, Obama will announce tomorrow his proposal for two new tax write-offs for businesses—a permanent extension of the research tax credit and a tax break that would allow companies to write off 100 percent of any new investments this and next year. It’s expected that these combined tax proposals would cost about $130 billion over the next ten years. This bill would be the tenth stimulus bill since the beginning of 2008, and would not be extremely large on the scale of the original Economic Stimulus Act passed in February of that year (see our recent blog on Stimulus Calculus for a rundown of the bills and their costs).
In the wake of Obama’s new ‘stimulus’ proposals, it’s imperative to remember the need to pay, over the longer-term, for any tax cuts or new spending we implement now. As we face an increasingly grim fiscal future, the need for economic growth in the short-run must be balanced with budgetary sustainability in the long-run.
As CRFB President Maya MacGuineas stated in Politico's Arena today:
"While more stimulus may well be in order in the short run, a budget plan to bring down future deficits and debt also needs to be put in place as quickly as possible, and phased in gradually as the economy recovers, in order to reassure global credit markets and keep interest rates low. Focusing on the relatively easy part of what taxes to cut and spending to increase--which makes up stimulus--may be politically desirable, but it will not get the job done."
Follow Stimulus.org for a complete look at how policymakers have addressed the economic downturn.