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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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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