Gary Cohn, Donald Trump’s top economic adviser, recently boasted, “The most excited group out there are big CEOs, about our tax plan.” Politically, it was a high-profile misstep: Republicans are supposed to pretend it’s working Americans who are excited about regressive tax breaks for the wealthy, not “big CEOs.”
But compounding the problem is that Cohn appears to be wrong. Bloomberg Politics reported this morning:
Major companies including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. say they’ll turn over most gains from proposed corporate tax cuts to their shareholders, undercutting President Donald Trump’s promise that his plan will create jobs and boost wages for the middle class…. Instead of hiring more workers or raising their pay, many companies say they’ll first increase dividends or buy back their own shares. […]
John Bogle, founder of Vanguard Group, said Tuesday that the Republican tax plan is a “moral abomination” in part because companies will hand over the proceeds to shareholders.
Bogle added yesterday, “One of the flaws is that corporations are putting their shareholders ahead of the people that built the corporation.”
This follows a related story from two weeks ago when Cohn participated in the Wall Street Journal‘s CEO Council meeting. An event moderator asked the business leaders in attendance to raise their hands if they intend to use their tax cuts on capital investments. Only a handful of executives’ hands went up
Cohn, surprised and apparently disappointed, asked, “Why aren’t the other hands up?”
The trouble is, we know the answer. Republicans do, too, though they insist on moving forward with their regressive plan, assuming that they know more about the CEOs’ businesses than they do.
As we discussed two weeks ago, 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 business leaders keep trying to tell us that the Republican rationale is plainly wrong.
Whether GOP policymakers understand 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 a Washington Post piece recently 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.” Here’s a radical idea: maybe Republicans should stop contradicting these business leaders and start listening to them? Update: Over the weekend, Reuters had a related report along these same lines: “U.S. President Donald Trump is selling tax reform to Americans on the promise it will create extra income for companies to invest in their businesses and create jobs. Some of the biggest companies have very different plans.”
Steve Benen is a producer for "The Rachel Maddow Show," the editor of MaddowBlog and an MS NOW political contributor. He's also the bestselling author of "Ministry of Truth: Democracy, Reality, and the Republicans' War on the Recent Past." Recommended
