Donald Trump is hailing his tax cutting plans as ‘radical’ and likely to stimulate US growth.How will they affect US productivity?
Well, the way in which productivity responds to trade measures is not clear … but if corporations are paying less tax, they may spend more on capital infrastructure or on R&D – and both of those are generally beneficial to productivity. However, they take time to show up in the figures – so don’t expect short term productivity gains. And with long-term investments, often something else (some short term effect or expediency) often intervenes.
So, as ever, we wait and see. We hope. And if it all works our, we might have to hail Trump as a visionary.