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Busch: Obama's Plan—A Step in the Right Direction

Over the weekend, President Obama unleashed a fusillade of economic proposalsmeant to not only raise the nation's hopes of economic recovery (just around the corner), but also to raise the flagging poll numbers of the Democratic party.

Here are the kenspeckel polling numbers that give Democrats a queasy feeling. According to a new Washington Post-ABC News poll, 40 percent of registered voters say they have more confidence in Democrats and 38 percent say they have more trust in Republicans. Sounds okay, right? The problem is three months ago, Democrats had a 12-point advantage. The trend is not their friend. On the economy, 43 percent of voters side with Republicans when it comes to dealing with financial problems, while 39 percent favor Democrats.

This is why I was encouraged to hear that President Obama is finally engaging in Clintonian politics and has begun a long-predicted shift to the middle. I'm not referring to the stump-style speech he gave in Milwaukee nor am I referring to the $50 billion infrastructure "Stimulus-Lite" spending program nor am I referring to the expansion of the research and experimentation tax credit.

Barack Obama
CNBC.com
Barack Obama

No, the good news is the President Barack Obama will propose that companies be allowed to more quickly write off 100% of their new investment in plants and equipment through 2011.

According to the WSJ, "Companies can now deduct new investment expenses, but over a longer period of time—three to 20 years. The proposed change, which would let companies keep more cash now, is meant to give companies who may be hesitant to invest an incentive to expand, acting as a spur to the overall economy."

For those keeping track, John McCain proposed a similar plan during the 2008 campaign for a 3-year window for expensing of investments with a 3, 5, and 7-year lives..

The big problem with President Obama's proposal is what he decides he wants to use to pay for the proposals. This is the devil in the details that doesn't get the headlines or the sound bites. If he chooses to take away a corporate tax break to pay for this proposal, the net gain is zero. Also, long-lived investments and tax-deductibility of borrowing costs is a recipe for tax shelters. The lack of details and potential for problems are probably why US stocks are not seeing much of a bounce on the news.

On Wednesday night when President Obama presents his plan in Cleveland. Stay tuned for details.

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Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.