US chem sector welcomes Obama tax incentives, with reservations

07 September 2010 21:24  [Source: ICIS news]

WASHINGTON (ICIS)--US chemical sector officials on Tuesday were both welcoming and wary about President Barack Obama’s plans to boost federal spending on infrastructure and cut some corporate taxes in hopes of reviving the nation’s wobbly economic recovery.

In addition, analysts doubted whether Congress had either the time or willingness to approve the president’s infrastructure stimulus plan or anything that looks remotely like a new spending bill.

At a Labor Day speech in Milwaukee, Wisconsin, on Monday, Obama outlined general plans to make broad improvements to US highways, railroads and airports with an initial and immediate $50bn (€39bn) in federal spending.

Obama said that the plan would involve rebuilding 150,000 miles of US highways, the addition of 4,000 miles of new railroad tracks and the construction or improvement of 150 miles of airport runways.

In his speech to a labour union audience, the president said the infrastructure plan would create new jobs immediately and over the long term. 

He also said the proposed spending would not add to the US national debt, saying that “we’re going to work with Congress to see to that”.

On Wednesday, the president is expected to announce further measures designed to stimulate the economy, perhaps to include about $100bn in tax breaks or incentives for companies that make equipment purchases or facility improvements.

The new initiative came in the wake of several worrisome economic reports, including a slight upturn in US unemployment figures, suggesting that the year-old US recovery may be stalling.

The White House also indicated that on Wednesday the president will call for legislation to make permanent the tax credit for companies’ research and development (R&D) spending.

That tax credit traditionally has been renewed year by year from Congress, but the annual drama about that R&D tax credit extension has long been criticised by business interests who would prefer long-term certainty.

The Society of Chemical Manufacturers and Affiliates (SOCMA) said on Tuesday that it welcomed the Obama administration’s plan to permanently extend the R&D tax credit.

SOCMA president Lawrence Sloan noted that his specialty chemicals group has long advocated for a permanent R&D tax credit, saying that “it makes it easier for small and mid-sized chemical manufacturers to manage their research budgets”.

Martha Gilchrist Moore, senior director of policy analysis and economics at the American Chemistry Council (ACC), noted that $50bn in federal spending on infrastructure projects such as road and rail construction and bridge repair could generate some $1bn in direct and indirect consumption of chemicals.

Council spokeswoman Jennifer Scott said that the ACC has traditionally supported a permanent R&D tax credit, although “we’d need to see specifics before taking a position”.

While the National Petrochemical & Refiners Association (NPRA) said it would welcome any policy that strengthens the nation’s economy and creates jobs, it too would want to see specific details, especially on how the $50bn in federal spending would be financed.

“It makes no sense to fund these programmes with new taxes and crippling regulations that will destroy existing jobs in the petroleum and petrochemical industries,” said NPRA president Charles Drevna.

The Obama administration’s plan to spend $50bn quickly on highway and rail construction may run into an immediate roadblock in the US Congress, where there is little sentiment - or time - for a new stimulus bill.

Analysts at investment bank FBR Capital Markets noted that Congress does not return from its August recess until next week, and then has only a few weeks left in its legislative calendar before adjourning for full-time campaigning in advance of the 2 November national elections.

“With federal government spending and the deficit as a central theme in the election, we believe that many members of Congress are going to be very reluctant to vote for any legislation that can be labelled as a ‘new stimulus’ programme,” FBR said in a memo to clients.

($1 = €0.78)

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