Friday, October 29, 2010

An Excellent Idea

According to Bloomberg: "President Barack Obama will make the case that his proposal to let companies take immediate tax deductions for the full cost of new equipment will help the economy grow and create jobs by encouraging about $50 billion in new investments through 2011."

I think that's an excellent idea.  It should be expanded and embraced by other countries, as well.

In my opinion, if the developed world (US, Europe and Japan) is to transform its bankrupt consumer spending economic model (which ultimately involved unsustainable borrowing) it must undertake and sustain very large capital investment, preferably in energy and transportation infrastructure.  For example, investing in upgraded electricity grids, instead of shopping malls and ski chalets.

By definition, such an economy involves more knowledge, more technology, more highly skilled workers and more value added per hour worked.  That's exactly what "developed" is all about - or should be, anyway.  And that's exactly what our resource-stretched, environmentally-challenged world needs, right now.

It would also rather quickly reduce pernicious trade imbalances which are spilling over into the foreign exchange battleground (that's code for US-China relations and the yuan peg).

Congress should move immediately.


  1. "The single most important thing we want to achieve is for President Obama to be a one-term president."

    -Mitch McConnell

    Good luck getting that "excellent idea" through Congress.

  2. I was going to make pretty much the same point as anonymous.

    I don't think the incoming Congress is going to have much interest in making things get better. Gumming things up works to their short-sighted, er, I mean, short-term political advantage.

  3. Hel-

    Even if Obama administration is willing to provide support for infrastructure projects, you need state level support as well. NJ's governor proudly killed (while he's in office) a decent yet poorly managed tunnel project

    the RR Republicans at state, local and national levels do not inspire confidence.

    as Okie and anonymous the first noted, the republican party will prevent obama any sort of legislative victory no matter how small or bad it might get for the american people.

    PS Below reads interestingly.

    The post-alcohol world
    Biofuels are back. This time they might even work

  4. Thx vm, that was a very interesting article on biofuels.


  5. that idea changes nothing, it simply pulls forward some demand. and then what? what is in store for the following 2-3 years, even more tepid demand?

    what could immediately work by putting more money into the consumer pocket is making healthcare insurance personal and foster competition in the sector, this is the biggest drag on economic activity.

  6. A tax incentive for capital investments in equipment may or may not create jobs.

    One of the problems we face in this economy is that it is pinned to consumerism rather than production. I personally don't think that the needed production is going to occur in giant corporations. They've already found that it's cheaper to manufacture their cars, shoes, clothes, appliances in Asia rather than in the US. If this economy is to recover quickly it will be on the backs of small businesses. Giving them a tax break on equipment purchases is a good first step, that's all. Much more needs to be done to remove government interference at all levels - Federal, state and local. When small businesses can once again be established and gotten into production, we will see a change in the unemployment rates

  7. MyMoneyMess, the problem we have as a country is that we have have somehow lost the ability to take care of our own finances. Increasingly complicated credit laws and policies have led people into financial ruin. Methods like consumer credit counseling can help matters, but not enough people are informed about their own credit situations to help lift this country out of the recession its mired in (regardless of economists who declare the recession over)