Trump's Tax Cut Hasn't Done Anything for Workers
By Noah Smith at Bloomberg
https://www.bloomberg.com/amp/view/articles/2018-07-18/trump-s-tax-cut-hasn-t-done-anything-for-workers?__twitter_impression=true
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Official data for the second quarter isn’t available yet, but private data isn’t looking encouraging. PayScale’s index of real wages shows a dramatic deterioration in the period:
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But perhaps two quarters is too early to expect results in this area. A better gauge might be business investment — if the tax reform is spurring businesses to increase capital expenditure, as it was supposed to do, then wage increases will probably follow in due course.
Some have expressed dismay that stock buybacks seem to have taken precedence over boosting capital investment. Since the tax cuts passed, companies have been using buybacksto return record amounts of cash to shareholders — more than $700 billion in the first two quarters. That naturally raises the possibility that companies don’t have good projects to invest in. If companies pass their tax windfall on to shareholders, those investors can choose to react by increasing consumption — meaning more of society’s resources go to the wealthy. They can also choose to invest the money in other companies with better growth prospects — but if those companies are also reacting by returning the money to their shareholders, rather than making capital expenditures, not much is getting accomplished.
So is any of the tax-cut windfall being used to finance the capital expenditure that the economy needs? Private nonresidential fixed investment did increase as a share of the economy in the first two quarters since the reform was passed:
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