The National Review observes that Obama’s latest proposal smacks of desperation and panic.
Obama knows it is losing its fight to let certain of the Bush tax cuts expire — even though it now has explicitly ruled out a compromise on extending them — and it is making one last push to buy leverage for its position by offering “targeted” tax cuts to the business community.
“Targeted” is one of this administration’s favorite words, second only to “inherited,” as in, “To address the severe crisis he inherited, President Obama pushed for a stimulus that was timely, targeted, and temporary.”
But what we have learned from the stimulus is that Congress has exceptionally bad aim, and that temporary measures to boost the economy do little more than steal demand from the future.
The Cash for Clunkers program boosted car sales for the two-month window of its existence, but it was followed by a steep drop a few months later: Average the two time periods together and you get no noticeable change in demand. The temporary Homebuyers Tax Credit had a similar effect on home sales, with transactions spiking the month before the credit expired and then plummeting in the months after.
Having spent the last 18 months binging on stimulus sugar and enduring the consequent crashes, Obama suggests we return to the cookie jar with a temporary credit that would allow businesses to take an immediate 100 percent deduction for new capital and equipment expenditures made between now and the end of 2011. A permanent credit of this sort might make sense as an option for businesses, but a temporary credit is a bad idea.
Just as Cash for Clunkers and the Homebuyers Tax Credit distorted demand for cars and homes without really stimulating it, a temporary deduction for capital expenditures would encourage firms that were already planning on building new plants or buying new equipment at some point to make those investments in 2011 rather than 2012, but it probably wouldn’t be enough to persuade them to invest in the absence of such plans.
I said this before and I’ll say it again :
There are 3 “F’s” to a good tax code that will boost the economy and make for long term prosperity :
* FIX IT (Make it low and competitive)
* FLATTEN IT ( make it simple and understandable )
* FORGET IT (make it permament and don’t mess with it. Messing with it will only cause UNCERTAINTY, which is certainly what’s happening now).
The Cash for Clunkers program boosted car sales for the two-month window of its existence”
A thread here in the past month stated that over 22,000 claims by dealers have not yet been paid. The ‘rebate’ or whatever you call it was either $3500 or $4500, depending on the car you bought. If you average that to $4000, then the dealers are still owed about $88 MILLION & are still waiting. The deals cannot bereversed- the trade in cars have been destroyed & the new cars have been driven for over a year.
After closing most of the car dealers in the USA, NObama is stiffing the remaining ones.
Anyone wonder why no one believes what Fibbs- the press secretary —says? Or NObama?