After Tax Bill Passes, Corporations… Reduce Spending on Capital Goods

Despite the Republican promise that their tax bill would supercharge the economy, orders for capital goods fell after the bill passed:

As Dean Baker points out, this isn’t investment, which can have long lead times, but orders:

According to data released by the Commerce Department orders for non-defense capital goods fell by 1.5 percent in January after dropping 0.4 percent in December. We get the same story even if we pull out volatile orders for aircraft: a drop of 0.2 percent in January after a fall of 0.6 percent in December.

….While investment takes time to put in place, these data are showing us orders. Orders can be made over the Internet or an old-fashioned land line telephone. They don’t take a lot of time….If the tax cuts matter for investment, then companies like GE, Microsoft, and Amazon were making plans as soon as it became clear that the Republican majority in Congress was serious about passing a tax bill. The fact that we are seeing zero evidence of an uptick in investment suggests that tax cuts don’t have much impact on investment.

Patience, Dean! I’m sure new investment will flow eventually. Corporations just need to figure out first how much money they’ll have left over after lining their own pockets with stock buybacks. That takes some time.

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THE BIG PICTURE

You expect the big picture, and it's our job at Mother Jones to give it to you. And right now, so many of the troubles we face are the making not of a virus, but of the quest for profit, political or economic (and not just from the man in the White House who could have offered leadership and comfort but instead gave us bleach).

In "News Is Just Like Waste Management," we unpack what the coronavirus crisis has meant for journalism, including Mother Jones’, and how we can rise to the challenge. If you're able to, this is a critical moment to support our nonprofit journalism with a donation: We've scoured our budget and made the cuts we can without impairing our mission, and we hope to raise $400,000 from our community of online readers to help keep our big reporting projects going because this extraordinary pandemic-plus-election year is no time to pull back.

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