Congress Republicans wary of Obama economy plan

WASHINGTON (Reuters) - Republicans in the Congress showed little willingness to help President Barack Obama approve $350 billion worth of measures to boost the economy with midterm elections less than two months away.

Obama's plans for billions of dollars in tax breaks for businesses are policies that Republicans typically embrace, but the party has little motivation to give the Democratic White House a win with polls showing them gaining seats in Congress -- possibly winning both houses.

Obama will announce his plans to stimulate the sagging U.S. economy -- including the tax breaks and new spending on transportation projects -- in a speech on Wednesday in Cleveland.

Senate Republican leader Mitch McConnell said on Tuesday there was little appetite for new economic proposals from Obama, arguing that the $814 billion stimulus that the president already pushed through Congress in early 2009 has not had the desired effect.

"After the administration pledged that a trillion dollars in borrowed stimulus money would create 4 million jobs and keep the unemployment rate under 8 percent, their latest plan for another stimulus should be met with justifiable skepticism," he said.

Obama needs support from the Republicans, who are far outnumbered by Democrats in Congress but are nonetheless able to block legislation.

The Republicans hope to take the House of Representatives and perhaps even the Senate in the November vote, which would put them in position to call the shots on any new economy-boosting initiative.

White House spokesman Robert Gibbs said officials there realize Congress has only weeks left to work before adjourning for the campaign trail ahead of November 2. He said Obama's plan "isn't about the next 60 days or the next 90 days," but rather is a long-term strategy for growth.

"In the end this president and this administration will be graded on what happens at the end of this road, not some place in between," Gibbs said.

With fellow Democrats facing punishment from recession-weary voters in November, Obama is under pressure to do more to create jobs and bring down the stubbornly high 9.6 percent unemployment rate, even as economists agree he has few good options left.

Obama's plans include $200 billion worth of tax write offs for businesses, a boost for infrastructure with an initial $50 billion investment, and increasing and permanently extending a tax credit for business research and development that would cost $100 billion over 10 years.

"These aren't necessarily bad proposals, but they don't address the two big problems that are hurting our economy -- excessive government spending, and the uncertainty that Washington Democrats' policies, especially their massive tax hike, are creating for small businesses," said House Republican leader John Boehner.

Analysts say the new economic proposals direct government assistance to some of the strongest parts of the economy without solving the biggest problem: finding work for the 14.9 million unemployed.

BUSH TAX CUTS

Republicans said their main objective is for Congress to extend tax cuts enacted during the Bush administration and which are set to expire this year. Party leaders are calling expiration of the cuts a tax hike.

Democrats want to extend the tax cuts for those making $250,000 a year or less, but Republicans want tax cuts for the wealthy to be retained as well.

Tax cuts should be extended for all Americans to help spur the economy, but even the middle-class cuts should end in two years, former U.S. budget director Peter Orszag said on Tuesday. Orszag's views differed from those of his old boss, Obama.

Gibbs said the United States "cannot afford" to extend all the tax cuts.

Congress returns to session next week for a limited period of three to four weeks before lawmakers leave Washington for a final burst of campaigning before the November 2 elections.

Jim Manley, spokesman for Senate Majority Leader Harry Reid, urged Republican help for the new economic measures.

"We are continuing to work with the administration and others on how to proceed," said Manley said. "But if we are going to get anything done, Republican cooperation, which has been all but nonexistent recently, will be necessary."

A senior Republican congressional aide doubted whether there was enough time on the calendar to undertake new economic measures, since next week is to be devoted to a $30 billion bill aimed at helping small business and Congress has yet to pass any of its annual government spending bills.

"They know down at the White House that these things can't logically pass before the election," the aide said.

A Democratic aide, however, said some work could get done, such as on Obama's $100 billion proposal to permanently extend the research-and-development tax credit for businesses and allowing businesses to write-off 100 percent of the cost new investments in plant and equipment.

"I'd be pretty surprised if we deal with the infrastructure part of the plan before the elections, but I think it's possible we'd start on the R&D and write-off stuff before," said the Democratic aide.

A Republican aide said more details are needed.

"While permanent R&D and expensing are serious ideas, what are the details? Will it be one step forward on tax relief and one step back on tax increases?" he said, referring to expiration of the Bush-era individual tax rates.

(Additional reporting by Andy Sullivan, Kim Dixon, Richard Cowan, Ross Colvin and Caren Bohan; editing by Philip Barbara)

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