Drudge Retort: The Other Side of the News
Wednesday, November 15, 2017

The whole point behind Republicans slashing the corporate tax rate is the GOP's assumption that it would spur massive capital investments, which would in turn boost the economy and create jobs. But yesterday, a room full of business leaders at CEO Council meeting send a pretty clear signal: the Republican assumptions aren't true. GOP policymakers are wrong, not just in general, but also about the key rationale behind their corporate tax policy.

President Trump's top economic adviser, Gary Cohn, looked out from the stage at a sea of CEOs and top executives in the audience Tuesday for the Wall Street Journal's CEO Council meeting. As Cohn sat comfortably onstage, a Journal editor asked the crowd to raise their hands if their company plans to invest more if the tax reform bill passes. Very few hands went up. Cohn looked surprised. "Why aren't the other hands up?" he said. (You can watch the clip here)

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The better question is, why did Gary Cohn expect more hands to go up? What's especially striking about this was the fact that the top economic voice in the White House found this surprising. Whether Trump World understands this or not, corporate profits are already high. The Republican plan is predicated on the idea that corporations would start rushing to make capital investments just as soon as they have more capital, but that's absurd. They already have the money.

What's more, as the Washington Post's piece noted, a Bank of America-Merrill Lynch survey was conducted over the summer that asked over 300 executives at major U.S. corporations what they'd do if they received a tax boost. The article explained, "The No. 1 response? Pay down debt. The second most popular response was stock buybacks, where companies purchase some of their own shares to drive up the price. The third was mergers. Actual investments in new factories and more research were low on the list of plans for how to spend extra money."

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#1 | Posted by retort at 2017-11-16 07:33 PM | Reply

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