fantapolitica
humorous look at Italian politics (bilingual)Sunday, September 26, 2010
Permanent Extension of the R&D Tax Credit
This is an unusually pointless post, since I am arguing that a dead on arrival proposal shouldn't have been made. The Obama administration proposed (or maybe just leaked that they might propose) a permanent extension of the research and development tax credit. This is (or would have been) an odd proposal, since it is very high minded and far forward looking.
The credit is extended every year. Permenent extension will have no effect on actual policy. It is partly a matter of honest budget forecasting -- pretending the credit doesn't exist in the future is one very minor way of understating future deficits. It is mostly a matter of removing uncertainty. Firms can't be certain the credit will be extended (even though it always has been) but they can be sure a permenent credit won't be revoked -- it takes 41 senators to block extension and 60 to revoke.
The really dismal prospect is that Obama thinks he is engaged in a serious debate with his critics. I understand that this is implausible, but recall the brief popularity of the argument that Obama and the Democrats were bad for the economy because they caused uncertainty. I don't think anyone took that argument seriously. Certainly elected Republicans didn't as is obvious from their enthusiasm for vague promises of major change of some kind.
Obviously Obama knows they aren't sincere, but he may have thought that journalists who quoted the Republicans argument would note that Obama's proposal reduces uncertainty. If so, he just doesn't understand the rules. If an argument is repeated and repeated, it will be quoted. If not it won't be quoted. Logic and consistency have nothing to do with it.
I know my hypothesis that the Obama administration thinks there is an actual policy debate is implausible, but can anyone think of a more nearly plausible explanation ?
I mean the proposal (or trial balloon) is long forgotten so no harm done, but it was worrisomely strange.
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