Donald Trump has cited massive tax cuts as his signature legislative achievement of his presidency.
But more ominously for Trump’s re-election prospects, several conservative economists now say the law, which turns 2 years old in December, so far has fallen short of its central promise to spread prosperity broadly.
“I was certainly expecting to see something different,” Alan Viard, an economist with the right-leaning American Enterprise Institute, said of a business investment boom that hasn’t materialized.
Boosters of the package predicted it would set off a virtuous trickle-down effect. The cuts, they said, would compel businesses to invest in their own operations. In theory, that would boost their productivity, ultimately yielding higher wages for workers.
Instead, the first step in that daisy chain largely hasn’t come to pass. Business investment has contracted over the past two quarters, falling 3% over the three-month period that ended in September—the steepest such drop since 2015.
Economists surveyed by The Wall Street Journal named the development as a top disappointment in 2019.
Defenders of the tax cut say Trump’s trade war cast a pall of uncertainty over the economy, spooking business leaders into shelving expansion plans.•