200 billion to boost investment

On the one hand, a sluggish recovery and unemployment does not decrease. On the other hand, companies sitting on a mountain of cash of 1.84 trillion dollars. To solve this equation, Barack Obama wants to encourage businesses to invest to boost jobs and growth. It is expected to announce on Wednesday a 200 billion tax relief for firms investing in industrial equipment.

This measure complements the newly introduced Obama after the presentation of a program of infrastructure investment of 50 billion dollars on Monday presented and oriented employment. The American president wants to show its willingness to revive the economy as the election looming mid-term November.

Marginal effect

"Obama wants to ensure that the investment is not sinking like a bellows with the expiration of the first battery of measures of raises," said Florence Pisani, an economist at Dexia AM. The investment has rebounded strongly in the first and second quarters, jumping by 20 or 25%. But it remains at levels well below those before the crisis, and economists expect it to slow down.

Economists are divided, however, the effectiveness of the measure on the investment. The federation believes that SMEs could, ultimately, help companies "at the margin," reports the Wall Street Journal. The level of capital spending by SMEs are at their lowest for 35 years, business leaders should take advantage of tax breaks to loosen their purse strings, the newspaper said.

Demand problem

Problem, "companies will not invest only to take advantage of the tax measure, they must observe and anticipate an increased demand for it," recalls Florence Pisani. They may well wait until the last moment, that is to say late 2011, to appeal to tax exemptions, until the maximum uncertainty dissipate growth, say analysts at Goldman Sachs. Boring for the Obama administration wants to boost the economy immediately.

Still, the measure to 200 billion may never pass the dam of Republicans in Congress. The conservative Senators leave nothing to pass to Obama, a few weeks they have elections to win. They also believe that these two new measures amount to recognize the ineffectiveness of the stimulus plan of 787 billion voted in February 2009.

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