The Voice of Young Conservatives Blog

I don’t get the chance to say this very often, but good work Mr. Obama. After nearly two years and $3 trillion in failed stimulus bills, President Obama’s economic team finally stumbled across something that could actually help the economy. The President’s proposal, which will be laid out Wednesday in Cleveland, will allow companies to write off 100 percent of their new investments immediately.

Let’s explain what this is, and what this isn’t. This isn’t a sea change. This is progress. Companies can already deduct new investment expenses, but current law forces them to spread the tax deduction over a number of years. The change would allow companies to take the full deduction upfront and thus keep more of their money now. A good idea, but don’t expect full employment over night. As reported by the Wall Street Journal,

“N. Gregory Mankiw, of Harvard University, and another former CEA chairman under President Bush, questioned whether the Obama proposal would have a big impact. Businesses can already take out a bank loan at extremely low interest rates to pay for new investments in plants and equipment, but they are not doing so, he said. It’s unclear why they would make those investments for a tax break.”

Almost regardless of the effectiveness the move signals that President Obama is ready to deviate from the Keynesian playbook. They aren’t ready to abandon it. Just look at the boneheaded $50 billion new infrastructure stimulus he’s proposing as evidence of that. But they are at least open to new ideas. Isn’t it amazing what the threat of devastating November losses will do to Democrats once-tightly held ideals.

This should be considered a step forward because it is a plan designed to unleash business investment, not government investment. The government is notoriously ineffective at picking effective uses for our money. Given the opportunity they’ll spend $150,000 to see how monkeys react to cocaine (No, I’m not exaggerating). Fortunately, tax write-offs such as this keep the government’s grubby little hands out of the equation. Businesses, whose bottom lines are dependent on good investment decisions, are the ones who get to decide how to spend the cash. This is a much more natural flow of money into the economy that creates far fewer market distortions and unintended consequences.

The benefits are all speculation. The details of the President’s plan won’t be released until tomorrow. If you’ve learned anything about the past few years – Obama is extremely talented at making things sound good, but Democrat lawmakers are equally as talented as screwing it up. As we’ve seen before the devil will be in the details.

There should also be questions about the timing. Conservative economists have been asking for this type of credit long before President Obama took office. Economic growth has been stagnant for too long. Unemployment has been persistently high. So why now? The cynic in me (live long enough in D.C. and you’ll become one too) wonders if it doesn’t have something to do with the elections.

Democrats’ November fortunes are dimming by the hour. They’re only going to be in Washington for a couple weeks before returning home to fight for reelection, likely not enough time to pass this legislation given recent trends. So could it be that this last minute economic push is nothing but a PR move? A morsel for Democratic lawmakers to take home to their constituents to show that they are doing everything they can to fix the economy? The timing of the bill is suspect, appearing to be calculated more on the needs of struggling Democratic constituents than struggling businessmen.

Nevertheless, hopefully this is a positive step forward. A step away from government-centric spending bills that have done little to kick-start our economy yet have done a lot to mortgage our future. But this is only a fraction of what needs to be done to unshackle the private sector.  If President Obama is truly serious about saving the economy, and not just the Democratic majority, he’ll focus on eliminating the economic uncertainty his prior bills have caused.

by Brandon Greife, Political Director