Obama to challenge Republican foes on economy

US President Barack Obama yesterday threw down the gauntlet to Republicans on the economy, as the lagging recovery and crippling unemployment threaten Democrats with a mid-term election meltdown.

Mr Obama was travelling to Cleveland, Ohio, in a personal challenge to Republican House of Representatives leader John Boehner, who used a recent visit to the city to demand the president sack his top economic aides.

In what USA Today newspaper bills as the “battle of Cleveland”, Mr Obama was highlighting a multi-billion-dollar package of tax breaks for businesses and spending on transport infrastructure meant to spur jobs growth and woo voters.

His plan, which faces an uncertain fate in Congress with lawmakers fixated on their own political skins ahead of the November 2 polls, appears to be a bid by Obama strategists to ease their boss’s political weakness on the economy.

“We are in a very political period, people are going to be making choices,” said a senior Obama administration official on condition of anonymity.

“It is propitious we will be in Cleveland, where Mr Boehner was a couple of weeks ago, unveiling what he said was the Republican economic vision.”

Mr Boehner, a conservative Ohio Republican with a colourful turn of phrase, is eyeing the Speaker’s chair with his party tipped to grab control of the House from Democrats.

On August 24, in the city hugging the southern shore of Lake Erie, Mr Boehner slammed Obama for “job killing tax hikes” and claimed the President had left America broke - though he offered few detailed policies of his own.

Mr Obama will accuse Republicans of pining for policies that caused the crisis, argue his actions prevented an even deeper disaster, and promote new initiatives costing around $180 billion.

He will highlight a new plan to allow companies to fully deduct the cost of investments in equipment for their business from their tax bill.

The largest-ever temporary investment incentive in US history would accelerate $200 billion in tax cuts over the next two years – most of which would eventually be paid back to the government.

Mr Obama will also propose expanding a research and experimentation tax credit for businesses by 20 per cent, a programme worth about $100 billion over 10 years.

He will also offer further details of the plan he unveiled in Wisconsin on Monday, for an immediate $50 billion investment in transport infrastructure.

The President will also likely reject the idea of extending Bush-era tax cuts for people earning more than $250,000, setting up a populist showdown with Republicans on the campaign trail.

Republican Senate minority leader Mitch McConnell warned late Tuesday that such a move would hit many small businesses and was tantamount to “a massive tax hike” in the “middle of a recession.”

Mr Obama’s aides admit that they face an uphill task in getting his plans through Congress in the four weeks before lawmakers hit the campaign trail.

“The President is doing his job, which is to propose ideas to move this country forward. We are not calibrating these decisions based on a political calendar,” said a senior official.

But Republicans are expected to brand Mr Obama’s plans as the act of a President doubling down on a failed economic bet – the $800 billion stimulus plan he passed last year.

Mr Boehner got in a pre-emptive strike on Tuesday.

“It shows how out of touch the White House is,” Mr Boehner told CNBC.

“Instead of working on getting the economy going again and getting people back to work, the White House is panicked over what I’ve got to say.”

“I don’t think the American people want any more ‘stimulus’ spending coming out of Washington. I think the White House is missing the big point here.”

Obama aides refuse to characterise the latest measures as a “stimulus” – recognition perhaps of Republican successes in painting last year’s plan as a massive government spending spree that failed.

Senior officials previewed Mr Obama’s plans amid more grim news for Democrats in polls suggesting the party faces a shellacking in November.

A Wall Street Journal/NBC News poll gave Republicans a yawning 49 per cent to 40 per cent advantage among likely voters, probably enough for them to grab back control of the House.

All 435 House seats are up for grabs along with 37 of the 100 Senate seats.