Republicans facing a tough midterm election season are pointing to the strong economy as proof their new tax law is working its magic.
But as campaign ads tout swelling payrolls and lawmakers spotlight companies handing out employee bonuses, there’s little evidence the tax cuts are already having an impact across the economy, which was already humming even before the law was enacted.
Unemployment, which dropped to 3.9 percent in April, has been declining for years, falling to 4.1 percent before the tax cuts were approved.
The billions in bonuses being handed out are tiny compared to the trillions of dollars in overall wages that Americans workers earn – and with the tight labor market, they might have been handed out anyway.
Meanwhile, the Treasury Department hasn’t even finished writing the new rules spelling out how exactly the new law will work. And the pace of change in business investment and labor supply is typically very slow.
“It’s just way too early to see any kind of evidence of faster growth, faster investment, more labor supply — any of that stuff,” said Joel Prakken, chief economist at Macroeconomic Advisers by IHS Markit, a prominent economic forecasting firm. “Anybody who thought that, within a quarter or two, there would be a big uptick in growth is deluding themselves.”