Obama unveils new stimulus plans

President Barack Obama on Wednesday took Republicans to task over their economic “values” as he promotes an $180bn package of proposals to stimulate the anaemic US economy and show the American public he is working to boost the recovery.

At a speech in Cleveland, Ohio, Mr Obama made a strong case for permanently extending Bush-era tax cuts for the middle class. But he made clear that he opposes the Republican plan to extend tax cuts for the richest two per cent of Americans, which the White House says would add $700bn to the deficit over the next decade.

“The president will be talking about the values and the diverging paths of the two parties,” a senior administration official said ahead of the president's speech, part of a week of economic announcements geared towards the November Congressional elections.

Mr Obama deliberately gave the speech in Cleveland to provide a contrast between Democrats’ policies and those laid out in the Ohio city last month by John Boehner, the minority leader in the House, who stands to become speaker if the Republicans take control, as forecast by many analysts.

“It's propitious that we should be in Cleveland where Mr Boehner was a few weeks ago outlining the Republican plans,” the official said.

Mr Obama has tried to make the midterm elections a choice between going back to the ways of the Republicans – who he has repeatedly said drove the economy “into a ditch” – and Democrats, portrayed as getting the car back on the road again.

The Bush tax cuts are a contentious issue as the midterms approach. Republicans argue that no one should face what would amount to a tax increase while the economy remains in such bad shape, whereas the White House says giving tax cuts to “millionaires and billionaires” does nothing to stimulate growth.

The White House wants the top-tax cuts – which reduced the tax rate for individuals earning more than $200,000 and couples earning more than $250,000 from 39 to 35 per cent – to expire at the end of the year. But some Democrats, facing tough re-election battles, are nervous about letting them lapse.

In his speech on Wednesday, Mr Obama pushed plans, already announced by the White House, to allow companies to write off all capital investments until the end of next year. That would extend a tax break that has allowed them to write off 50 per cent of such investments in 2008 and 2009.

This would amount to almost $200bn in tax cuts over the next two years, the White House said, adding that all but $30bn of this would be recouped by bringing forward tax benefits from future years. The White House said it was working with Congress to fund the remainder by closing tax loopholes.

He will also ask Congress to fund a $50bn infrastructure plan to build roads, railways and airport runways, in addition to the investments made under the $862bn stimulus package. The plan would see 150,000 miles of roads and 4,000 miles of rail built in the next six years and 150 miles of runway rehabilitated or reconstructed.

The administration says this would create jobs next year, although it could not put a number of how many people would be hired.

The third plank of Mr Obama’s new economic plans would call for Congress to expand and make permanent a business tax credit for research and development, costing about $100bn over 10 years.

The economy is chief among voters' concerns and, while they widely criticise Mr Obama for failing to focus sufficiently on unemployment, polls show voters also balk at any new spending that resembles a second stimulus package at a time of trillion-dollar deficits.

An NBC/WSJ poll published on Tuesday found that only 26 per cent expect the economy to get better in the next year.

But it is unlikely that the measures will be passed by Congress before the elections, if at all.

Democrats stand to lose control of the House of Representatives and perhaps the Senate as well, as voters express disappointment with the Obama administration’s failure to bring down the unemployment rate and boost growth.