Obama's New Stimulus Proposal

In his latest attempt to jump-start the floundering US economy, President Obama actually suggests something that makes sense.

His proposal would allow businesses to immediately write-off 100% of capital equipment purchased by the end of 2011.

"President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections.

An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland Wednesday.

Amid an uptick in unemployment to 9.6 percent, and polls showing that the November election could be dismal for Democrats, Obama has promised to propose new steps to stimulate the economy. In addition to the business investment tax breaks, he will also call for a $50 billion infrastructure investment and a permanent expansion of research and development tax credits for companies."

Allowing companies to immediately expense their costs is a start towards improving the current economic climate, and is worth pursuing. In addition, making the R&D credit permanent is also a good idea and will be embraced by American businesses.

None of these changes will directly affect the current unemployment picture, however.

Major changes are needed at this point to reduce sky-high unemployment, to include relaxing federal regulations concerning who businesses can hire and how much they have to be paid and ending unemployment benefits after a short period of time to discourage people from staying on the dole well beyond when they normally and historically would have.

Of course, further uses of tax policy as a tactic, such as slashing (or even eliminating) the corporate income tax and reducing payroll taxes (offset by current or future entitlement decreases) would be a major, major boon to the economy.