Obama’s Economic Recovery Plan Not A Hit With Economists

President Obama’s proposal to jolt a listless recovery with $180 billion worth of tax breaks and transportation projects left economists largely unimpressed Tuesday.

The president will roll out his plan today in Parma, Ohio, but details have been dribbling out. The administration wants to spark economic growth by:

• Letting businesses deduct from their tax bills 100% (up from 50%) of what they invest in new equipment through 2011. The deduction would give businesses $200 billion up-front; but it would cost the Treasury only $30 billion over the next decade because businesses would have gradually written off the value of the equipment anyway.
• Expanding and making permanent the business tax credit for research and development. The credit has been extended 13 times since it was created in 1981, but often at the last minute, freezing investment in the meantime. The administration says the expanded credit would cost $100 billion over 10 years. Robert Atkinson, president of the Information Technology and Innovation Foundation, welcomes the move but says the credit should have been expanded even more.

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