Crikey.com.au, 10 July 2018:
Evidence is now emerging
of just how extraordinarily wasteful Donald Trump's trillion-dollar corporate
tax cut has been as the results -- or lack thereof -- filter into the real US
economy.
It's now
well-established that the bulk of the tax cuts have gone into record-breaking
share buybacks and increased dividends by US companies, with hundreds of
billions of dollars flowing or set to flow back to investors. But not a lot of
the rest is flowing into extra investment -- the raison d'etre of
company tax cuts. New
investment data shows US equipment investment fell in the first
quarter of the year compared to the final quarter of 2017. How about wages,
which are supposed to increase due to company tax cuts (at least according
to Mathias
Cormann)? In June, monthly wage growth in the US fell to
0.2% from 0.3% in March, lower than expected and leaving wage growth
at 2.7% for the 2017-18 year. Inflation in the US was 2.8%
for the year to May, suggesting US workers are actually going backwards
after inflation.
US unemployment is at 4%
(up a tad) — far below our own level of 5.5%. Like the Kiwis, the Americans
can’t get wages to grow even with full employment — or even with tax cuts that
have massively inflated the US deficit at a time of peak employment.
The fact that Trump and
his GOP cronies have pushed the US budget deficit toward $1 trillion a year
(remember when the Republicans were the party of fiscal restraint?) at a time
of such strong employment also has implications for the stimulatory effect of
such largesse. New research from the San
Francisco Federal Reserve shows that fiscal stimulus is significantly
weaker at times of expansion than during recessions, and that the Republican
tax cuts will not meet what the paper terms the “overly optimistic”
expectations of boosters. Instead of the boost to US GDP growth this year of
about 1.3 percentage points estimated by the Congressional Budget Office and
other forecasters, they write, “the true boost is more likely to be less than 1
percentage point,” with some studies pointing to as little as zero.....
Read the full article here.
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