Money in the Morning

TOP STORY — Obama’s economic plan

The president on Tuesday will call for a $100 billion extension and expansion of the R&D business tax credit. That’s in addition to the $50 billion investment in a new six-year infrastructure program that he rolled out Monday.

Bloomberg, among others, notes the timing of the stimulus push: “Elections in less than two months to decide U.S. House seats and about a third of the Senate are focused on unemployment near 10 percent and a budget deficit swelled by the government’s financial-system bailout. Obama is traveling this week to Midwestern states where joblessness is hurting some Democratic candidates’ chances of getting elected.”

Monday's feedback...

Boehner: More failed stimulus.

Matt Yglesias: More like this.

Brad DeLong: "Obama Bunts."

Joe Weisenthal, Business Insider: It will flop.

Jay Newton-Small, Time magazine: GOP won't like it, Dems won't want to haggle over it and there's little time in the calendar left for it.

WSJ edit board spends 1,400 words (!) on why the Democrats’ stimulus policies haven’t worked.

“... the real roots of Mr. Obama's economic problems are intellectual and political. ... More broadly, Democrats purposely used the recession as a political opening to redistribute income, reverse the free-market reforms of the Reagan era, and put government at the commanding heights of economic decision-making.”

Former Fed Vice Chair Donald Kohn says Fed shouldn’t set limit on aid to economy.

TOP STORY #2 — GOP pulls ahead on economy: New WaPo/ABC poll finds that 43 percent of voters back Republicans when it comes to dealing with financial problems; 39 percent favor Dems, and 15 percent trust neither. This is the first time GOP has had any edge on the issue since 2002.

TUESDAY’S MUST READ: Peter Orszag unleashed — In his first NYT column, the former White House budget director calls for a two-year extension of all of the Bush-era tax cuts, including those for upper-income earners. He says all the cuts — including those for the middle class — should be allowed to expire after two years to help get the deficit down to sustainable levels, something that won’t happen without more revenue. He suggests a modest value-added tax could provide that revenue — but says that won’t pass.

Why this matters: The WH 2011 budget proposal — the one that Orszag wrote — calls for a permanent extension of the Bush tax cuts for the middle class and the expiration next year of the cuts for individuals making more than $200,000 per year and couples making more than $250,000.

Orszag the Columnist: “In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.

“Why does this combination make sense? The answer is that over the medium term, the tax cuts are simply not affordable. Yet no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned.”

What will Paul Krugman say?

More from fiscal hawks this week...

The right-leaning Center for Individual Freedom launches on Tuesday the “One More Vote” campaign, seeking to require supermajorities in both the House and Senate for passage of any budget that projects a deficit, any tax hike and any debt limit increase. The name is a reference to the balanced budget amendment, which fell short of Senate passage by one vote in 1997. (h/t Kevin Madden)

The Concord Coalition and Peter G. Peterson Foundation will launch its 12-city “Fiscal Solutions Tour” Wednesday. Events will focus on the fiscal commission’s work.

Moving the markets — WSJ scoop:  “Europe's recent "stress tests" of the strength of major banks understated some lenders' holdings of potentially risky government debt, a Wall Street Journal analysis shows.

“An examination of the banks' disclosures indicates that some banks didn't provide as comprehensive a picture of their government-debt holdings as regulators claimed. Some banks excluded certain bonds, and many reduced the sums to account for ‘short’ positions they held — facts that neither regulators nor most banks disclosed when the test results were published in late July.”

Reuters headline: “Asia stocks near 1-month high; euro dips after WSJ”