Fed officials doubt tax cuts will create investment, hiring boom

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Federal Reserve Facade 2

Two Federal Reserve officials, both former Goldman Sachs Group Inc. executives, expressed doubt corporate tax cuts under consideration in Congress will lead to an investment or hiring boom.

“Very few CEOs that I’ve talked to in my district say that the tax package is going to lead to some dramatic change in their behavior,” Minneapolis Fed President Neel Kashkari, a former Treasury Department official in the George W. Bush administration, said in a Bloomberg Television interview on Tuesday.

“I do think it’s going to lead to more buybacks and more dividends. That’s not necessarily a bad thing, but I don’t think that that itself is going to lead to a dramatic increase in investment or hiring in the U.S.,” he said.

The House of Representatives is scheduled to vote Tuesday on the tax proposal, and Senate leaders intend to bring the measure up as soon as they get it. President Donald Trump has called the fiscal overhaul necessary to boost growth, saying on Twitter three days ago it will lead to “higher growth, higher wages and more JOBS!”

Dallas Fed President Robert Kaplan, speaking earlier on Bloomberg Television, described the impact on hiring and investment as marginal.

“Most CEOs I talk to, a bulk of them, may not have any explicit impact on their investment. On the margin, it may be positive," Kaplan said. “Understanding we’re already at or near full employment, we’re already got record profits and capital is relatively inexpensive, means that the impact of this, when I talk to corporate CEOs, probably modest and on the margin."

Bloomberg News
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