US corporate leaders are increasingly upbeat about growth in the world’s largest economy, as lawmakers prepare to enact deep tax cuts, the Business Round-table said Tuesday. The group’s index of CEO sales projections, spending and hiring plans over the next six months hit its highest level in nearly six years.
The Economic Outlook Index rose to 96.8 points for the fourth quarter, up from 94.5 in the July-September period and the highest since early 2012. Hiring plans dipped slightly, but remained high. CEOs project GDP growth of 2.5 percent for the year, in line with prior years but below the White House’s target of three percent.
The Business Round table’s chairman, JPMorgan Chase CEO Jamie Dimon, said business leaders’ high hopes were pinned on Washington’s delivery on a pro-growth agenda. “To continue this momentum, it is critical that we enact pro-growth tax reform that will level the playing field for US business to be globally competitive,” Dimon said in a statement.
After some last-minute snags, Republican lawmakers are inching towards the finish line in enacting the first sweeping tax code overhaul in three decades despite official projections it could add $1 trillion to the budget deficit over 10 year, and widespread criticism benefits go primarily to the rich.
The House and Senate have to reconcile their different versions of the bill, which would cut corporate taxes to 20 percent from their current level of 35 percent, while also cutting taxes on partnerships whose profits go directly to their owners.
Supporters say this brings the US tax regime in line with those of other developed countries and will encourage multinational corporations to repatriate their earnings but effective corporate tax rates are already significantly below 35 percent.
Analysis of the Senate tax package say it will produce minimal to modest gains for the economy. Economists at investment bank Goldman Sachs estimated this week the Senate bill could boost growth by 0.3 percentage points in 2018 and 2019, but could be minimal or even negative from 2020 and beyond.