Just Don't Call It A Stimulus Package
President Barack Obama is proposing to extend the research and development tax credit. The problem is the tax credit for R&D would cost an estimated $100 billion in tax revenue. Obama is hoping the R&D tax credit will spur development. The President will have to figure what he will have to cut to help reduce the deficit. The White House is also considering infrastructure spending and to free up credit for small businesses.
Elizabeth Warren, chair of the Congressional Oversight Panel explained to Steve Chiotakis why there is such difficulty for small businesses to get loans.
Chiotakis: So Professor, if small businesses generate, what, two of three jobs in this economy, doesn't this fly in the face of the necessity of bailing out the banks in the first place?
Warren: Well you know, that's really the irony here isn't it? Remember, in the fall of 2008, Secretary Paulson went to Congress and the American people and said, we need this $700 billion bailout, because if we put the money into the banks, that's how it will make it on into the real economy. And the evidence shows that simply didn't happen; we put the money into big Wall Street banks and that's where it stayed.
Treasury Sec. Tim Geithner extended TARP until October of 2010. However, small businesses are still having a tough time getting loans. Geithner has not been able to get small banks to paticipate. The Independent Community Bankers of America gave Geithner a list of demands that must be meant before these banks will paticipate. Why doesn't Geithner just set up a temporary loan guarantee funds for small businesses? The small banks don't want to take the financial risk. Small businesses can get loans through the federal government to expand and hiring extra labor.
Duncan Black and Mike Konczal question how much job creation and economic growth will come from R&D tax credits. The H. Lee Moffitt Cancer Center & Research Institute in Tampa received $20 million in stimulus money. Director Thomas Sellers told TBO.com that the stimulus money is helping Moffitt produce fifty patent a year and five start-up companies.
As a longterm policy, helping spur research is smart. It isn't going to turn the economy around. What this tells me is Geithner and Obama's economic team has run out of ideas.