President Donald Trump has repeatedly touted the GOP’s planned tax overhaul as a major boon for American businesses — but a candid moment during the Wall Street Journal’s CEO Council in Washington, DC showed that even business leaders don’t think this is true.
During a question-and-answer session on taxes between Trump’s chief economic advisor Gary Cohn and the Journal’s editor-in-chief Gerard Baker, WSJ associate editor John Bussey asked the audience — a room full of CEOs and corporate leaders — if they planned to increase their companies’ capital investment if the GOP tax plan passed.
A few hands were timidly — and only slightly — raised, but the majority of the room seemed hesitant about making significant investments in their businesses despite the corporate rate cut Trump has emphasized.
Cohn, the Director of the National Economic Council and a major proponent of the bill, seemed taken aback by the response.
“Why aren’t the other hands up?” he laughed nervously, as the room remained silent.
1. Tax-overhaul backers say corporate rate cut will encourage investment by businesses
2. During #wsjceocouncil interview with Gary Cohn, WSJ asks CEOs to raise hands if they’ll boost investment if rates cut
3. Few CEOS raise hands
4. Cohn asks: “Why aren’t the other hands up?” pic.twitter.com/5PI60NlW0A
— Tim Hanrahan (@TimJHanrahan) November 14, 2017
And then, during another session, it happened again. White House economist Kevin Hassett touted how the tax cuts will lead to increased business spending and therefore a boost to the GDP. But when asked for a show of hands whether they’d plan to make capital investments for the business under those circumstances, the audience mostly stayed put.
KEVIN HASSETT: business spending will help drive 3% growth.
The #WSJCEOCouncil audience is asked how many business leaders here would invest w/ a tax cut.
Not many hands go up.
WH's Hasset tries to brush it off saying "the lights are bright" in the room.
— Josh Jamerson (@joshjame) November 14, 2017
These business leaders have good reason to be suspicious. According to the Brookings Institution, tax reform tends to have only minimal, or even negative, effect on GDP growth.
Trump is hoping that, at the expense of federal revenue, slashing the statutory corporate tax rate will encourage economic growth — he’s predicting a GDP growth of 3-5 percent — but economists have been skeptical of the plan. The middle class has also been skeptical as polls show a majority of Americans think the tax plan mostly benefits the rich (they’re right).
And now we know many American CEOs are too.