President Barack Obama is trying to turn the tables on Congressional Republicans ahead of November’s mid-term elections by offering up a slew of pro-business measures his opponents might have offered up themselves under different circumstances.

Among them is a tax break that allows companies to immediately write off 100% of their investments in new plants and equipment, a move designed to motivate corporations to start dusting off expansion plans put on hold during the recent financial crisis.

By some estimates, U.S. companies are sitting on $1.84 trillion in cash they’ve been hoarding as they wait for the economy to regain its health. The Obama administration would like to see some of that money put to work, preferably in ways that increase production levels and create jobs.
To help kick start the economy in 2008 and 2009, businesses were allowed to write off 50% of many capital purchases the first year they were made.

But in a speech this week in a Cleveland suburb, Obama supported the 100% investment proposal that would let companies deduct the full cost of all their capital investments in the same year that the investments are made rather than spreading those deductions out over long periods that could stretch to two decades.

The administration says the 100% tax break will save an estimated 1.5 million businesses about $200 billion.

But here’s the catch: the tax break is only good through the end of 2011. In that way it mimics other temporary stimulus measures that helped for a while but failed to serve as the long-term economic catalysts the administration had hoped for.

There is growing sentiment among economists and other financial types that these short-term fixes aren’t helping and that permanent measures are needed.

“It shouldn’t be temporary, it should be permanent,” said Axel Merk, president of Merk Investments and author of the book ‘Sustainable Wealth.’ “They should have done this a long time ago. They need to encourage investment.”

The stimulus efforts that have been enacted so far -- the Cash for Clunkers program, the $8,000 first-time home buyers credit, and various ‘shovel ready’ infrastructure programs – all target short-term consumption, according to Merk.

Cash for Clunkers, which briefly energized the auto sector last year, and the home buyer credit, which did the same for the housing sector this year, both encouraged Americans to buy cars and homes. The infrastructure programs, meanwhile, were designed to put cash in peoples’ pockets so that they can go out and spend.

None of these programs encourage long-term economic growth, said Merk. What’s more, as others have pointed out, when these kinds of programs expire, or the infrastructure job ends, the economy is hurt by the falloff in consumer activity, a dynamic that has contributed to the recent sluggishness in economic growth.

An underlying problem, according to Merk, is that since politicians are always focused on the next election they tend to focus on programs that generate the quickest results.

“Politicians don’t embrace these kinds of tax policies because they take longer to go into effect and for the benefits to become apparent, but they absolutely should be encouraged,” said Merk.

Merk said the private sector, if given the right incentives, can be trusted to deploy their capital in investments that will increase their productivity. And when that productivity increases, companies will need to expand and hire more people. All of that translates to long-term economic growth.

“It’s economics 101,” he said.

The investment tax break is one of several proposals that also include $50 billion in spending on infrastructure improvements mostly on roads, railroads and airports, as well as a $100 billion expansion and extension of the expired research-and-development tax credit. The latter tax credit, widely popular among both Democrats and Republicans, would be made permanent under the president’s proposal.

All of the measures need to be approved by Congress.

Surprisingly perhaps, the U.S. Chamber of Commerce has been sharply critical of the president’s ostensibly pro-business tax proposals.

Arguing that the investment tax is not enough to encourage significant expansion by U.S. businesses, the Chamber called on the Obama administration to formulate a long-term tax policy. Uncertainty is the greatest hurdle to economic growth, according to the Chamber.

“The biggest impediment to business investment is not lack of capital – they have a record $1.8 trillion in reserves – but rather uncertainly brought about by the policies wrought by this administration and the Congress. Think of the investment tax credit as an incentive to buy a house built on a marsh, or a flood plain,” the Chamber wrote on its Web site.

Merk said it probably won’t matter one way or the other because Congress isn’t likely to approve any of Obama’s proposals. The public has soured on anything that smacks of “stimulus spending,” and besides, Obama hurt his own credibility on the issue by not making job creation a priority until less than two months ahead of the mid-term elections.

“Washington lacks the commitment to pass this sort of legislation,” said Merk.