Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Obama's Massive Tax Cuts


Rebates and infrastructure cornerstones of plan.

As Inauguration day nears, details of President-Elect Barack Obama's huge economic stimulus package are emerging. In today's meeting with Congressional Democrats, Obama begins to lay out his vision for reviving the nation's catatonic economy.

According to the Wall Street Journal, around 40% of what could be an almost $800 billion plan may come in the form of tax cuts. Rather than mailing rebate checks, as the Bush administration did last summer -- which by most accounts did little to boost real economic activity -- Obama wants to reduce tax withholdings to get more cash into the hands of middle-class workers with every paycheck.

The plan also calls for the widening of so-called "tax look-backs," which allow companies to apply today's losses to future tax bills. The new proposal would let firms book losses against past tax payments, freeing up money for the current tax period.

To encourage businesses to buy new machines, factories and make other capital investments, Obama is considering allowing newly purchased assets to be more quickly depreciated. Along with tax breaks for hiring new workers and delaying layoffs, the new administration wants to discourage downsizing and prevent firms from delaying expansion plans.

These and other tax-specific initiatives would come on top of previously announced plans for heavy infrastructure investment. When news of the impending stimulus package began to trickle out toward the end of 2008, peddlers of all things metallic enjoyed a strong bounce into year-end.

Freeport McMoRan (FCX), the world's second-largest copper producer, is up almost 100% from its December lows, Nucor (NUE), America's largest steelmaker has bounced more than 90% since November and US Steel (X) is approaching levels not seen since last October. Still, these and other commodity-centric firms are well off highs seen just last summer.

Ultimately, dollars earmarked for businesses and consumers alike are being sent out with a single mission: To be spent. With consumer and business spending making up almost 85% of gross domestic product, it's no wonder politicians are urging Americans to part with their precious pennies for the greater good.

As the sage Mr. Practical reminded us this morning, however, the true path to economic recovery is through saving, not spending. With each dollar the Federal Reserve prints to finance this massive deficit-spending program, our paychecks -- though they may be increasing in size -- are worth less every month.

Economic stimulus is all well and good, but handing out a currency that's constantly being debased is akin to tires spinning in the mud: With each rotation, they just bury themselves deeper, and the task of unburying gets longer, more difficult, and infinitely dirtier.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opin= =3D =3D3D ion about the performance of securities and financial markets by = the wr=3D iter=3D3D s whose articles appear on the site. The views expresse= d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi= a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web= site is intended to con=3D stitute a recom=3D3D mendation or advice address= ed to an individual investor =3D or category of inve=3D3D stors to purchase= , sell or hold any security, or to =3D take any action with re=3D3D spect t= o the prospective movement of the securit=3D ies markets or to solicit t=3D= 3D he purchase or sale of any security. Any inv=3D estment decisions must b= e made =3D3D by the reader either individually or in =3D consultation with = his or her invest=3D3D ment professional. Minyanville write=3D rs and staff= may trade or hold position=3D3D s in securities that are discuss=3D ed in = articles appearing on the website. Wr=3D3D iters of articles are requir=3D = ed to disclose whether they have a position in =3D3D any stock or fund disc= us=3D sed in an article, but are not permitted to disclos=3D3D e the size o= r direct=3D ion of the position. Nothing on this website is intende=3D3D d = to solicit bus=3D iness of any kind for a writer's business or fund. Mi= ny=3D3D anville mana=3D gement and staff as well as contributing writers wi= ll not respo=3D3D nd to em=3D ails or other communications requesting inves= tment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos