Large US companies remain upbeat on hiring and capital spending, due in part to continued confidence that Washington will enact tax reform, the Business Roundtable said today.
Large US companies remain upbeat on hiring and capital spending, due in part to continued confidence that Washington will enact tax reform, the Business Roundtable said today. But that positive sentiment is at risk if the reform fails to materialize. An index of business sentiment rose to 94.5, up from 93.9, according to a quarterly survey by the Washington lobby group, which represents large US companies. The economic outlook survey showed more chief executives expected to hire workers compared with the second quarter, but slightly fewer expect to boost capital spending.
Fewer respondents also predicted increased sales compared with the second quarter, a decline the organization attributed to back-to-back hurricanes that have crimped spending. The report comes ahead of what is expected to be a major battle in Congress on tax reform, Wall Street’s greatest priority for Washington. The Trump administration still has not outlined a full proposal, although it expected to release details later this month. The issue is pivotal to short-term growth, Business Roundtable President Joshua Bolten said.
“There’s a big opportunity on the table here for the administration and Congress,” Bolten told reporters in a conference call on the survey. “There’s also a risk. Because there’s a real downside to the US economy if they fail to get tax reform done in a timely fashion.” Executives are assuming that Washington will enact tax reform and current investment and hiring plans are built on expectations for lower tax rates. So if Washington fails to deliver, the economy could suffer, Bolten said.
Tough lobbying battles are expected on everything from the spending cuts needed to offset the tax reductions, to a bevy of policies that could affect just about every sector, including mortgage lenders, retailers and charitable groups. Trump has pushed to reduce the corporate rate to 15 per cent from 35 per cent — a top rate few companies if any actually pay due to allowed deductions — but Congress may go for a less generous cut.
Bolten said there is more natural alignment among Republicans in the White House and Congress on tax reform than on health care, which has died repeatedly this year. But he acknowledged there is still much work ahead to finalize the package. “They’ve got some very tough terrain to navigate to get from here to there for a successful tax reform bill,” he said.