Economists Question Obama's $200 Billion Tax Cut

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WASHINGTON -- President Barack Obama is offering new proposals one after another this week in an effort to show Democrats are doing all they can to restore the economy.

In a speech scheduled for Wednesday in Cleveland, Ohio, Obama is expected to suggest businesses get permanent tax credits for research. The president's latest proposal is a $200 billion tax cut that would allow businesses to write off new investments in plants and equipment from now to the end of next year.

The president started the week by pushing for at least $50 billion in infrastructure spending on roads, railways and runways.

"We're talking investments in tomorrow that are creating hundreds of thousands of private sector jobs right now," Obama said.

Economists question if the new suggestions will be enough.

"What you hope is, if you can throw enough small things at the economy and shoot enough small bullets, that you do enough to actually be able to win this war against what is a very fragile recovery," said Diane Swonk, chief economist for Mesirow Financial.

Despite Obama's new business tax cut proposals, many small businesses would prefer an extension of former President George W. Bush's tax cuts, which would help them.

The president doesn't want to keep the tax cuts for the upper incomes and small businesses -- but only for the middle class.

"We have to worry about the spending power of the majority of the population," White House economic advisor Laura Tyson said on CBS' 'Face the Nation' Sunday. "The 98 percent of the population for whom we would extend the Bush tax cuts - that is where you're going to get a high level of consumption. That's where incomes are highly under pressure. And we need to help people with their incomes and spending."

However, Obama wants to let the Bush tax cuts for people making more than $250,000 a year expire in December. It's a move economist Mark Zandi says is unwise in this fragile economy.

"High income households are psychologically very, very fragile," Zandi said. "They've seen their nest egg significantly diminished because of the decline in stock values and housing values."

Whatever Obama proposes, Republicans will say it's just politicking.

"We always like to see deathbed conversions, but the fact is if we'd had done this kind of thing nearly a couple years ago, we'd be in a lot better shape," Sen. John McCain, R-Ariz., said on Fox News Sunday. "They're just flailing around."

Yet, the president said the Republicans would likely find fault with anything he proposed and said the GOP is just "The Party of No."

"If I said the sky was blue, they'd say 'no,'"Obama said. "If I said fish live in the sea, they'd say 'no.'"

"It allows him to define the Republicans as the party of no," Democratic consultant Karen Finney said. "If Democrats seize on that opportunity, I think that's a great opportunity for Democrats."

The problem for the president and the Democrats is that it's not just Republicans who are saying no to his policies, it's voters -- and in huge numbers.

"There are races here in which you have Democratic incumbents down 10, 11 points," said Norm Coleman, American Action Network CEO. "People are simply angry. They're angry about the direction of the country. They're angry about the economy, about not having jobs, and they are angry about Obamacare."

Republican strategist Kevin Madden said Republicans are almost sure to take the U.S. House of Representatives, which could mean the Senate too.

"Ever since post-World War II, the House has never flipped without bringing the Senate with it - even when nobody expected it to happen," Madden said.

"If Republicans win control of Congress, it is because voters are voting against Democrats," Politico's James Hohmann said.

"Republican-based voters can't wait to get to the polls to register their vote on Election Day," Madden added. "Democrats are having a hard time even getting out of bed in the morning."

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Paul  Strand

Paul Strand

CBN News Washington Sr. Correspondent

As senior correspondent in CBN's Washington, D.C., bureau, Paul Strand has covered a variety of political and social issues, with an emphasis on defense, justice, and Congress.  Follow Paul on Twitter @PaulStrandCBN and "like" him at Facebook.com/PaulStrandCBN.