The Case for Permanent Expensing

Abstract:

Investment spending has been sluggish in spite of record low interest rates and enormous levels of excess reserves in the banking system. Banks have been criticized for not lending enough, but the real problem is that not enough businesses want to borrow. Businesses are hesitant because the expected after-tax returns on added capital are too low to make adding to the capital stock worthwhile. Instead of easier money, we need higher after-tax returns to capital to create investment and growth.