Increased Profits, Increased Deficit

Good article today in the Wall Street Journal about various impacts of the new tax law, the link is below.

Tax Law Impacts

The analysis is generally favorable in the sense that companies will have more money to use and the uses will also be more profitable.

Of course that was clear in the reduction of the corporate tax rate, but the question about whether the impact will be enough to pay for the increase in the deficit isn't really addressed but based on the article there is no reason to believe it will even come close.

Yes in some cases the investments in new facilities will be spent in this country but the number of jobs from new facilities may after all be offset by the modernization which actually results in less jobs.

The article discusses a simple law of economics that companies will only expand if there is a market for their additional products.

So a biological research company that needed a new facility now decides it is cheaper to build it here, will create some jobs.

However additional use of robots in existing plants that get modernized will cost jobs.

Small businesses may grow faster, but growth is still a measure of demand.

Expansion without customers = bankruptcy.

The amount of economic growth being forecast as a result of the tax changes is modest indeed and it points out the flaw in the republican math without meaning to.

I've heard them say we only need .4% growth to offset the costs, but they mean .4% each year.  We might get a one time .4% boost but then it becomes as we say, cooked in, and the next year it doesn't generate new growth.

The companies have more money to use and it may reduce debt, increase dividend, even increase wages and bonuses some, but this was all money that used to get paid as taxes and without it the Government has to increase the deficit.

Its going to have to get paid sometime.