Tax cuts: Broken promises

Numerous claims on tax cuts made by President Trump and his economic team, adviser Gary Cohn and Treasury Secretary Steven Mnuchin, have turned out to be false. Under the Republican plans, not everybody will get a tax break, the deficit is expected to increase, and the wealthy, including Trump himself, will likely benefit.

Posted: Dec 5, 2017 9:22 PM
Updated: Dec 5, 2017 9:22 PM

America's CEOs are feeling very good right now about the economy and looming corporate tax cuts.

The Business Roundtable said on Tuesday that its CEO economic outlook index has risen to the highest level in nearly six years. The powerful lobbying group, chaired by Jamie Dimon, credited progress on the Republican tax overhaul and President Trump's efforts to cut regulation.

However, less than half -- 43% -- of CEOs polled plan to ramp up their hiring over the next six months.

The poll of 150 CEOs was taken between November 2 and November 17 as the Republican tax plan was building momentum in Congress. The Business Roundtable said many CEOs are confident that the legislation, which would slash the corporate tax rate to 20% from 35%, will get enacted.

Despite anticipating tax cuts, the Business Roundtable's employment gauge retreated a bit from the four-year highs hit during the summer. The percentage of CEOs who plan to cut jobs ticked up to 18%.

None of that is to say that business leaders sound bummed about Washington or the economy. On the contrary, more CEOs are also planning to step up capital spending on things like new equipment and factories. That's a good sign because business spending has been a missing link during the recovery from the Great Recession.

Dimon, who serves as the Business Roundtable's chairman, predicted that overhauling the outdated tax system will make the United States more competitive and eventually help American workers.

"We're in favor of wages going up for the American public," Dimon, the CEO of JPMorgan Chase, told reporters during a conference call. Under Dimon's leadership, the Business Roundtable has spent millions to champion tax reform through a national TV and online advertising campaign.

Related: Tax cuts could make it harder to fight next recession

Dimon said that tax reform will "lead to capital expenditures, productivity and wages." He cautioned though that it may take time for workers to see the benefit, saying the "cumulative effect is more important than what happens tomorrow."

For many Americans, the key will be whether they will finally enjoy stronger wage growth after years of anemic pay hikes that have struggled to keep up with inflation.

One reason for hope: 31% of CEOs polled by Business Roundtable pointed to labor costs as the greatest cost pressure facing their company.

Pointing to several studies that he did not name, Business Roundtable CEO Joshua Bolten predicted that a "substantial portion of the corporate rate cut" will "ultimately benefit" workers.

It's the first time in six years that regulatory costs were not the biggest expense headache for business leaders. Bolten said business leaders no longer "have to anticipate the next regulatory hammer that's going to hit their industry."

Related: How tax reform could hinder innovation in the U.S.

However, it's not clear if rising CEO optimism and euphoria on Wall Street will translate to new and better jobs for Main Street.

Rather than ramp up hiring, many companies may instead use their tax savings to reward shareholders with mega share buybacks and generous dividends. After all, companies already have tons of cash and CEOs will be reluctant to hire more workers unless they know the demand is there to justify the expenses.

"You don't just 'build it and they will come,'" said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

More critically, the U.S. may lack the qualified workers required to feed a hiring boom. The unemployment rate has dropped to a 17-year low of 4.1% and companies are struggling to find skilled workers to fill record-high job openings.

"With an unemployment rate of 4.1%, we're basically out of supply," said David Kelly, chief global strategist at JPMorgan Funds. "I don't think you will get much more employment growth."

Indiana Coronavirus Cases

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Confirmed Cases: 34211

Reported Deaths: 2125
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Marion9761576
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Illinois Coronavirus Cases

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Confirmed Cases: 118917

Reported Deaths: 5330
CountyConfirmedDeaths
Cook771193603
Lake8238288
DuPage7620368
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Will5510273
Winnebago220955
McHenry153972
St. Clair112180
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Stephenson2012
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Union15510
LaSalle15013
Whiteside13912
Iroquois1314
Coles12615
Out of IL1181
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Jefferson10116
Grundy982
Knox980
Monroe9511
McDonough8711
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Unassigned800
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