After years of costly layoffs and plant closings, things are looking up for the heavy-machinery giant Caterpillar, which forecasts solid global sales growth and increased demand this year. Yet despite the corporate investment incentives at the center of President Trump’s tax overhaul, the company’s executives have no plans to supercharge investment or expansion.
Caterpillar’s plans for new investment remain low by historical standards. Instead, the company has started using cash to repurchase its own stock as a way to return cash to shareholders, something it hadn’t done since 2015.
“We feel we have the necessary bricks-and-mortar capacity that we need,” Brad Halverson, the company’s chief financial officer, said in a post-earnings conference call last Tuesday.
Republicans sold the 2017 tax law as “rocket fuel” for American investment and growth, saying that corporations — flush with cash from lower tax rates — would channel money back into the economy by building factories and offices and investing in equipment, which would help companies grow and provide winnings for workers.
Economists say that may happen as companies readjust their spending plans over the coming months to take advantage of the new law, and they note that it is too early to tell how much the tax law will spread into the broader economy.
But, so far, hard evidence of such an acceleration has yet to appear in economic data, which show more of a steady investment roll than a rapid escalation. And while there are pockets of the economy where investment is picking up — among large tech companies and in shale oil business, for example — corporate spending on buying back stock is increasing at a far faster clip, prompting a debate about whether the law is returning money to the overall economy or just rewarding a small segment of investors.
Data on the gross domestic product, released Friday, showed that business investment grew at a 6.1 percent annual clip during the first three months of 2018, down from 7.2 percent during the first quarter last year. Excluding oil and gas investment, which is particularly volatile, the investment pace grew slightly over the past year.
While the first-quarter investment numbers were more robust than they were in 2015 and 2016 — when a bust in oil prices curtailed a large chunk American corporate spending — they weren’t radically different from the roughly 5 percent rate of growth for business investment that has prevailed since 2010.
— CEA (@WhiteHouseCEA) April 27, 2018
Representative Erik Paulsen, a Minnesota Republican who chairs the Congressional Joint Economic Committee, attributed the G.D.P. growth to the tax cuts. “Americans are better off today than they were 16 months ago,” he said in a statement on Friday. “Business investment is strong, wages are growing, and disposable income is climbing thanks to tax reform and pro-growth policies.”