Trump’s tax cut, 10 months later: Sugar rush or solid bump?

The $1.5 trillion tax overhaul that President Donald Trump signed into law late last year has already given the U.S. economy a jolt, at least temporarily. It has fattened the paychecks of most American workers, padded the profits of large corporations and sped economic growth.

Those results were not a surprise. Economists across the ideological spectrum predicted the new law would fuel consumer spending, in classic fashion: When the government borrows money and dumps it into the economy, growth tends to accelerate.

But Republicans did not sell the law as a sugar-high stimulus. They sold it as a refashioning of the incentives in the U.S. economy — one that would unleash more investment, better efficiency and higher wages, along with enough growth to offset any revenue lost to the government from lower tax rates.

Ten months after the law took effect, that promised “supply-side” bump is harder to find than the sugar-high stimulus. It’s still early, but here’s what the numbers tell us so far:

The investment bump

Proponents of the tax overhaul said it would supercharge the recent lackluster pace of business spending on long-term investments like buildings, factories, equipment and technology.

Such spending is crucial to keeping economic growth strong. And strong growth is central to Republican claims that the tax cuts would ultimately pay for themselves.

Capital spending did pick up steam this year. For companies in the S&P 500, capital expenditures rose roughly 20 percent in the first half of 2018. Much of that was concentrated: The spending of just five companies — Google’s parent, Alphabet, and Facebook, Intel, Exxon Mobil and Goldman Sachs — accounted for roughly a third of the entire rise. Much of that spending went toward technology, including increased investment in data centers and computing, server and networking capacity.

For the full year, Goldman Sachs analysts expect that capital expenditures for companies in the S&P 500 will be up about 14 percent, to $715 billion. Research

DOUG MILLS / THE NEW YORK TIMES President Donald Trump signs the tax reform bill Dec. 22, 2017, in the Oval Office of the White House. Nearly a year after the tax cuts took effect, economic growth has accelerated, but wage growth has not. Companies are buying back stock, and business investment is a mixed bag.