By Patricia Zengerle
WASHINGTON (Reuters) – President Barack Obama will push billions of dollars in new business tax incentives and spending on big construction projects on Wednesday, as he tries to convince a balkyCongress to pass measures intended to spur the economy and create jobs.
Obama will travel to Ohio to tout programs that include accelerating $200 billion in business tax write-offs, which the White House says would eventually cost just $30 billion, an infrastructure spending boost of at least $50 billion, and increasing and permanently extending a tax credit for research and development costing $100 billion over 10 years.
Obama’s speech is expected to be strongly political and it comes less than two months before congressional elections when his Democrats face the threat of big losses. He was seen couching his economic plans as an expression of his values, favoring the middle class over the wealthiest Americans and big corporate interests such as oil and gas companies.
“These measures will help create jobs while building an American economy that is more competitive and productive over the long term,”Obama’s communications director, Dan Pfeiffer, said in a White House blog.
White House spokesman Robert Gibbs acknowledged Cleveland was selected as the venue for Obama’s speech because House Republican leader John Boehner of Ohio had made a speech there last month calling on Obama to fire his economic team.
Boehner, going on the offensive ahead of Obama’s speech, called on Wednesday for a two-year freeze on all current U.S. tax rates, including Bush-era tax cuts for the rich that are set to expire at the end of this year.
Speaking on ABC’s “Good Morning America” show, Boehner also proposed the government cut spending for next year to 2008 levels, before the controversial federal bailouts and Obama’s $814 billion stimulus plan.
“What that will do is help small businesses who have no clue what the coming tax rates are going to be,” Boehner said. “It gives them some certainty.
“If we’re able to do this together, I think we’ll show the American people that we understand what’s going on in the country and we’ll be able to get our economy moving again and get jobs growing in America,” he said.
The White House pitches Obama’s economic plans as essential to get the economy moving again and set for long-term economic growth. But they cannot pass them without support in Congress from Republicans, who are far outnumbered in the House of Representatives and Senate by Obama’s fellow Democrats but still able to block legislation.
With polls showing Republicans favored to cut into or even eliminate Democratic majorities in Congress in November elections, the minority party has little motivation to give Obama a win. Republican leaders also are wary about more spending, in the face of massive budget deficits, instead favoring more tax cuts and reduced spending.
In another divide with the opposition, Obama will stress that he will not ease his opposition to extending tax cuts for the wealthiest Americans enacted under his Republican predecessor, George W. Bush.
Democrats want to extend only the cuts for those making $250,000 a year or less but Republicans want to extend them for the wealthy as well and are calling expiration of the tax cuts this year a tax increase.
“There is no doubt that we strongly believe that a healthy, vibrant, economically viable middle class is key to economic recovery and we strongly support the extension of tax cuts to the middle class,” an administration official told reporters, speaking on condition of anonymity in order to speak freely.
“… But it’s also true that we don’t have 700 billion additional dollars to borrow to pay for tax cuts that essentially will go to millionaires … Saving that $700 billion and applying that to the deficit is a much better use of that money, so that is a values statement,” he said.
Aides said Obama also will repeat his call for Congress to pass a package of programs for small business, which Republicans have blocked in the Senate.
REPUBLICANS SAY FIRST STIMULUS FAILED
Republican leaders are skeptical about Obama’s proposals, saying they are reluctant to back more spending because the $814 billion stimulus Obama got through Congress in early 2009 has not had the desired effect.
Polls show deep public skepticism about the stimulus plan, and White House officials have proven reluctant to even use the word — saying repeatedly Obama’s new proposals are not another stimulus program but rather a set of proposals.
Economists said the new plans could provide a modest burst of activity in a slow-growth economy. The risk is that they would only pull forward investments, which would do little to alter a sluggish growth trajectory and spur hiring to alleviate the 9.6 percent unemployment rate.
The White House says the eventual cost of accelerating the $200 billion in tax write-offs would be $30 billion, because businesses would eventually deduct the depreciation of their equipment, bringing the total value of the different programs to $180 billion — or more — over time.
An administration official said the $50 billion in infrastructure spending would be in the first year, with more possible, depending on discussions with Congress.
Aides said Obama’s speech will not include any additional proposals. There had been widespread speculation that he might announce measures including a payroll tax holiday or increased federal funding for clean energy programs.
(Additional reporting by Emily Kaiser and Thomas Ferraro; Editing by Todd Eastham, Eric Walsh and Bill Trott)