Chart of the week: ‘Trump bump’ went to profits, not workers

Last year’s stimulus package from the Trump administration, comprising corporation tax cuts and higher spending, has certainly boosted US growth, as Jason Furman points out in The Wall Street Journal. GDP rose by around 3% in 2018, 0.5% more than last year.

But business investment has slipped recently, “undermining claims the tax cuts would have a large and immediate impact on investment”. The money hasn’t gone to workers either – wages have only risen very gently on an annual basis while net profits have soared.

Many companies have used the savings to buy back shares. The budget deficit, meanwhile, has expanded to 3.8% of GDP, “a nearly unprecedented figure” for an economic recovery in peacetime.


“Britons may not be quite the workaholics… that we thought. Instead of working more than 1,700 hours a year, on average, a more accurate figure may be…1,500 when time off is properly taken into account (according to the OECD). If we are working fewer hours, our output per hour is higher. We are still less productive than France, Germany and America, but by less than was thought. The difference in respect of France may be 10% rather than 20%, and the gap with America comes down from 24% to 16%. The smaller productivity gap is to be welcomed, although it reduces the force of one argument for why Britain lags behind other countries at all: that we spend too much time working and that our efforts are subject to the law of diminishing returns. Even when our working hours are adjusted downwards, we still have some catching up to do.”

David Smith, The Sunday Times