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Advisor

lets pull some demand forward

worked great for housing and cars,  till the programs ended.

 

Are you ready to buy some new equipment?

 

http://online.wsj.com/article/SB10001424052748704392104575475920686869934.html?mod=WSJ_hpp_LEFTTopSt...

President Barack Obama, in one of his most dramatic gestures to business, will propose that companies be allowed to write off 100% of their new investment in plant and equipment through 2011, a plan that White House economists say would cut business taxes by nearly $200 billion over two years.

8 Replies
Veteran Advisor

Re: lets pull some demand forward

I'm not the mot imaginative or creative soul you'll ever meet, so I suppose there is some "big picture" stuff that I'm missing here....but...just what sort of businesses do you suppose somebody would be itching to start up from scratch just now?

 

It does remain that so many of the current prominent businesses we have today were ramped up in a much more cheap way than this would ever be.  That being through 15 cents on the dollar consolidation and cannibalization in the 1980s and early 1990s.  So actually paying for a start up might be a rather revolutionary concept for the modern crony capitalist who is sitting around waiting for a fat deal to be steered his way. Tax abatement or no. Probally would prefer to get if for the 15 cents and then be able to claim a tax credit, based on some inflated market value.

 

The businesses that are failing, other than those that fail from outright corruption or gross mismanagement seem to me to be the ones who produce and distribute stuff and services that are seen as generally consumer budget excessive or avoidable, even so much as they might  be desirable to many.

 

Just what would you set out to make or supply or distribute that enough people would have to have it or be able to pay for it.? Particularily under what appears to be a long run of tight credit. Customers here, or for export abroad?

 

If it's "green economy" you run into the religion of conservative anti-science. Even so much as a sniff of that and Republicans in Congress are going to vote it down to appease the know-nothing elements in the winger base. So what then? We've got enough cars to last 20 years, particularly in a down turned economy that keeps peole at home. And enough housing to house us all 3 or 4 times over at the rate families and freinds are moving in (or back in as it may be) together. The rate of divorce and seperation is dropping  as, if not already, soon will be birth rates.

 

We'll get about as much economic activty in the form of consumprtion as the Chinese decide they need to fund to keep us consuming nominally. But that won't leave much room for many new descrectionary domestic products going into the shopping cart.

 

And as I know you've been in on discussion on the matter before, I find it Interesting to see the natural marking down of housing to the realistic market being discussed, even posed as a policy option, in a major news rag:

 

http://www.nytimes.com/2010/09/06/business/economy/06housing.html?src=me&ref=general

 

 

Senior Contributor

Re: lets pull some demand forward

Does that mean the machinery write off will go from a max of $250k per year to UNLIMITED$$$$$$$$?

HOORAY!! I may just become a democrat again, as long as he continues the ethanol $.45/gal subsidy.

Advisor

Re: lets pull some demand forward

I don't know that it will help create new startups, but it could well spur existing businesses to purchase new equipment.  The same cash for clunkers pulled forward some demand for new cars.   Problem is after you've pulled forward demand, demand drops like a rock, as we saw with the new home buyer credit.  This program could help kick the can a little further, what then?

 

It has to get through congress too, pretty fat chance.  Don't buy that new truck yet 4wd.

 

I'd seen the NYT article.  Strange that thought showing up there.....makes you wonder......now that via the fed balance sheet, fha, fannie and freddie, the biggest chunck of the mortgage debt is now on the backs of the taxpayers....NOW is the time to let'er crash?  Is the tBTF now short real estate?  Probably not, but it makes you wonder.    

Senior Advisor

Re: lets pull some demand forward

And we wonder why the tax code is so large and complex. It's the concept that if you give tax breaks people will do something productive. When in fact you are simply giving them a break they don't need.

 

What ever happened to updating and investing because there is potential income advantage. I don't want to pay for business expansion or 4wd's new combine. I want him to help me pay taxes.

Frequent Contributor

Re: lets pull some demand forward

Don't know the Kudos procedure, but certainly would give for this post.  The big boys certainly don't need more tax breaks to become larger.

Veteran Advisor

Re: lets pull some demand forward

I have a hard time seeing how any body or an entity that is embroiled in this credit fiasco of almost unlimited leverage and bundled and resold and shuffled around and often impossible to trace mortgage securities could get themselves short.

 

They are really in a tight spot as it could probably only lead to something like this which turns pretty much everything, everywhere upside down if practiced at the scale that U.S. under water mortgages would represent:

 

http://www.tribune.ie/article/2010/sep/05/irish-bank-default-on-some-debt-could-make-sense-s/

 

So as you say...maybe there has been enough pushed over to the public side to make it not so bad for the banksters.

 

There never was an easy way out on this, but right up front on the first days back in the black Sept. of '08 when it got to where it was all too big to fit under the carpet might have been the best time.

 

And as the water swirls around in the bowl, day after day more homes would move into that catagory and the "walkaways" would skyrocket and the mediators and the bankruptcy courts would become even more overwhelmed than they already are etc etc.

 

Can't wait, actually, to see how this new round of GOP Congressional and Governor's office leadership that we are being assured from all corners that we are going to be getting soon is going to handle  all of this.

 

 

Senior Contributor

Re: lets pull some demand forward

just one more stupid obummer move to try and move his failures forward

Re: lets pull some demand forward

For the revenue foregone it probably does have a greater stimulative effect than leaving the Bush tax cuts for those making over $250K would.

 

I'm told, ad infinitum, that those brackets are primarily occupied by small business owners who create jobs. Well, there ya go, just go buy some equipment and you get an even bigger tax cut.

 

I assume that even your friendly neighborhood radiologist could go buy a new MRI machine (like the combine, no telling if he really needs one), or the proctologist could stock up on a few hundred gross of gloves.

 

Nah, I imagine he can already expense those.