Trump, GOP tax law: NABE survey, GDP show no investment boom

House
Speaker Paul Ryan, President Donald Trump, and Rep. Kevin
Brady.
Drew Angerer/Getty
Images

• Republicans promised that the Tax Cuts and Jobs Act would
  lead to a boom in US business investment.
• A new survey from the National Association for Business
  Economics, or NABE, showed that few companies are increasing
  investment or hiring due to the tax law.
• The survey also matches the most recent data on capital
  expenditures that shows no meaningful boost.
• On the other hand, few firms reported negative outcomes due
  to President Donald Trump’s tariff policies.

One of the cornerstone Republican arguments during the debate
over the tax reform bill was that the business tax cuts would
lead to an investment boom in the US.

“These massive tax cuts will be rocket fuel, rocket fuel
for the American economy,” President Donald Trump
promised in November.

The GOP’s argument in the run up to the Tax Cuts and Jobs
Act’s passage was that businesses would invest the cash from the
smaller tax bill into new equipment, factories, and
hiring. But according to a new survey by the National
Association for Business Economics, the TCJA isn’t causing an
investment boom.

From the survey:

• “81% of respondents indicate that the 2017 Tax Cuts and Jobs
  Act (TCJA) has not caused their firms to change hiring or
  investment plans.”
• “This share is an increase from the roughly two-thirds of
  panelists reporting no changes as a result of the TCJA in the
  previous two surveys.”

A somewhat higher number of goods-producing firms have reported a
boost from the TCJA, said Sara Rutledge, NABE’s Business
Conditions Survey Chair.

“The 2017 Tax Cuts and Jobs Act has not broadly impacted hiring
and investment plans at panelists’ firms, although panelists from
the goods-producing sector do report some incidence of increased
investments, and a shift toward hiring and investments from
abroad to the US,” Rutledge said.

Only 6% of businesses in the service sector, which makes up the

largest chunk of the US economy and employment in the
country, reported changes in investments and hiring due to the
GOP tax law.

The lack of a capex boom is also in line with the most recent
hard data from last week. While Friday’s GDP report showed the
economy growing at a solid pace, nonresidential
fixed investment grew at the slowest pace in almost two
years. Additionally, core
durable goods orders also fell for the second straight month,
according to the report released Thursday.

Most businesses aren’t responding yet to the trade
war

While there is
growing anecdotal evidence from Federal Reserve surveys and
company earnings calls that Trump’s trade war is weighing on
business decisions, most respondents to the NABE survey said it
so far hasn’t affected their plans.

Overall, 77% of NABE respondents reported no changes to
hiring and investment plans due to trade policy. But
a
gain, the changes were more acutely felt by
goods-producing firms.

“Goods-producing firms are more likely to have made
changes, with 46% raising prices and 38% delaying investments,
higher percentages than those in the July survey,” the release
said.

The latest wave of Trump’s tariffs on
roughly $250 billion worth of Chinese goods was imposed on
September 24.