I would note that the "boom" in capital investment we had in 2018 was on the order of 1/5 of what the Trumpets had promised. Rana and Daniel's point is that the "boom" we had was directed in directions that substitute for rather than complement labor—and thus claims it will drive wage gains are implausible:
Rana Foroohar (November 2018): US Capital Expenditure Boom Fails to Live Up to Promises: "One of the key economic tales told by the Trump administration is that corporate tax cuts would spur huge investment and growth in the US economy, raising wages and ushering in a new era of bullishness. Not quite.... Nearly half of the corporate profits that were repatriated went straight into stock price-bolstering share buybacks. Capital expenditures grew too, at least for a couple of quarters. But what business is investing in has changed quite a lot... and that alters everything.... Back in 1998... 48.3 per cent of business investment went to new structures and industrial equipment and about 30 per cent into technology such as information processing equipment and various types of intellectual property, according to data compiled by Daniel Alpert.... This year, only 28.6 per cent went to structures and industrial equipment, while technology and intellectual property made up 52 per cent of all new investment...
...Investments in data processing equipment or software upgrades, which make up a big chunk of this year’s tech related spending, tend to be job killing, at least in the short term.... Investment in intangibles such as licenses or patents does represent innovation and it can enrich the owners of that intellectual capital. But such spending does not tend to improve the livelihoods of a broader swath of workers—at least not in America.... You can see these shifts playing out in the key corporate stories of the day.... Five big US companies—Apple, Alphabet, Cisco, Microsoft and Oracle — increased capital investment 42 per cent year on year to 42.6bn. But they also spent a whopping 115bn buying back their own stock, making them by far the largest beneficiaries of Donald Trump’s tax cuts, a great irony considering how the US president likes to position himself as being tough on Silicon Valley....
Like the Trump tax cuts, the current investment boom has benefited companies. It has been less kind to workers, particularly those who once would have benefited from factory jobs that carried good health and retirement benefits.... We are stuck with a capex “boom” that is more like a fizzle...
#noted
