Breaking News, Tax Break - Amazing!!!

The WSJ is reporting that President Obama proposes a massive $200 billion tax break through 2011, which allows businesses to write-off 100% of the investment in new plant and equipment. This is an amazing development because it is a recommendation from conservative economists.

See the following article:

Weisman, Jonathan, McKinnon, John D., 2010. Obama to push tax break. The Wall Street Journal, Sept. 7.

The proposal requires congressional approval.

To date, rather than tax cuts the Obama administration has adopted a policy of aggressive fiscal spending. The anticipated proposal marks a radical change in policy and perhaps an admission that the spending programs have failed miserably to reignite growth.

It also might be an indication of intense fear by the government that the US economy will slip back into recession if taxes are not cut immediately. There is rising tension in America because of severe unemployment and huge uncertainties. I hear some radical things being proposed by people that borders on panic.

In a related development, Japan is in an intense political fight over additional stimulus versus fiscal restraint. Given the speculation of additional government spending, Japaneses government bond prices have risen sharply in Mon. trade.

With a cumulative national debt equalling about 200% of GDP, I think it is insane that any Japanese politician would propose more spending. Like in America, conditions might be near a general panic among Japanese voters thus prompting politicians to make radical proposals. The strength of the Yen is causing huge tension among the people.

In total, general panic among voters is unfavorable to investing.

It will be interesting to observe the reaction of equity markets in the US given the prospective tax breaks slated for announcement on Wed. in Cleveland, Ohio.