By Binyamen Appelbaum and Jim Tankersly • New York Times
WASHINGTON — A wave of optimism has swept over American business
leaders, and it is beginning to translate into the sort of investment in new
plants, equipment and factory upgrades that bolsters economic growth, spurs
job creation — and may finally raise wages significantly.
While business leaders are eager for the tax cuts that take effect this year,
the newfound confidence was initially inspired by the Trump administration’s
regulatory pullback, not so much because deregulation is saving companies
money but because the administration has instilled a faith in business
executives that new regulations are not coming.
“It’s an overall sense that you’re not going to face any new regulatory
fights,” said Granger MacDonald, a home builder in Kerrville, Tex. “We’re not
spending more, which is the main thing. We’re not seeing any savings, but
we’re not seeing any increases.”
The applause from top executives has been largely reserved for the
administration’s economic policy agenda. Many chief executives have been
publicly critical of President Trump’s approach to social and cultural issues,
including his response to a white nationalist march over the summer in
Charlottesville, Va., that turned deadly and his decision to withdraw from the
Paris climate accord. Two of the business advisory councils that Mr. Trump
assembled in the nascent days of his presidency disbanded after executives
grew concerned about his public remarks on the violence in Charlottesville.
There is little historical evidence tying regulation levels to growth.
Regulatory proponents say, in fact, that those rules can have positive economic
effects in the long run, saving companies from violations that could cost them
both financially and reputationally. Cost-benefit analyses generally do not look
just at the impact of a regulation on a particular business’s bottom line in the
coming months, but at the broader impact on consumers, the environment,
public health and other factors that can show up over years or decades.
But in the administration and across the business community, there is a
perception that years of increased environmental, financial and other
regulatory oversight by the Obama administration dampened investment and
job creation — and that Mr. Trump’s more hands-off approach has unleashed
the “animal spirits” of companies that had hoarded cash after the recession of
Some businesses will essentially be able to get away with shortcuts that
they could not have under a continuation of Obama-era policies. The coal
industry, for instance, will not have to worry about a regulation, overturned by
Congress and Mr. Trump, that would have protected streams from mining
Brett Hartl, the government affairs director at the Center for Biological
Diversity, said the Trump administration might avoid big-splash regulatory
rollbacks this year and instead would make it harder for federal agencies to
block business expansion.
“It’s not going to be sexy things like ‘We’re killing the Clean Power Plan,’”
Mr. Hartl said, referring to the Obama-era rule aimed at curbing greenhouse gas emissions from coal-fired power plants. “But you can make it systematically harder for an agency to do the right thing.”
Only a handful of the federal government’s reams of rules have actually
been killed or slated for elimination since Mr. Trump took office. But the
president has declared that rolling back regulations will be a defining theme of
his presidency. On his 11th day in office, Mr. Trump signed an executive order
“on reducing regulation and controlling regulatory costs,” including the
stipulation that any new regulation must be offset by two regulations rolled
That intention and its rhetorical and regulatory follow-ons have
executives at large and small companies celebrating. And with tax cuts coming
and a generally improving economic outlook, both domestically and
internationally, economists are revising growth forecasts upward for last year
and this year.
Even before it became clear that Republicans would pass a major tax cut,
capital spending had risen significantly, climbing at an annualized rate of 6.2
percent during the first three quarters of last year. Surveys of planned
spending also show increases.
Mr. Trump bragged in a news conference last month that he has rolled
back 22 regulations for every new one — 67 deregulatory actions, versus three
new regulations. Often in conjunction with the Republican Congress, his
administration has canceled several rules approved at the end of the President
Barack Obama’s term, including a regulation on limiting mining debris in
streams, a requirement that broadband providers obtain permission from
customers to collect and use online information, and a ban on plastic bottles in
Administration officials said last month that, since January 2017, federal
agencies have delayed, withdrawn or made inactive nearly 1,600 planned
regulatory actions. Further rollbacks will affect financial services as well as
energy and labor rules, among others.
And Mr. Trump has appointed outspoken critics of regulation to lead
several federal agencies, including the Environmental Protection Agency and
the Consumer Financial Protection Bureau.
The evidence is weak that regulation actually reduces economic activity or
that deregulation stimulates it. But business executives are largely convinced
that the cost of complying with rules diverts money that could be invested
elsewhere. And economists see a plausible connection between Mr. Trump’s
determination to prune the federal rule book and the willingness of businesses
to crank open their vaults. Measures of business confidence have climbed to
record heights during Mr. Trump’s first year.
“The notion that deregulation unleashes growth is virtually impossible to
find in the data,” said Jared Bernstein, a senior fellow at the Center on Budget
and Policy Priorities who served as the chief economic adviser to Vice
President Joseph R. Biden Jr. “What does matter is this idea that confidence
matters. If their expectations about the future are positive, then it does make a
Businesses acknowledge that the most important reason for their
increased optimism is the simple fact that the domestic economy continues to
expand, with few clouds on the horizon.
Better yet, the world’s major economies all are growing for the first time
since the financial crisis. Confidence among European manufacturers hit a
high in more than a decade, according to European Commission data that goes
back to 1985, even without tax cuts or less regulation.
In Japan, now in the middle of its longest period of growth since the early
1990s, the central bank said corporate investment was exceeding its
expectations, and it raised its forecast.
“The fundamental backdrop here is that this is a global synchronized
expansion lifting everyone’s spirits, from Tokyo to New York,” said Mark
Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “The entire
global economy is on one page for the first time in over a decade. We’re all
moving in sync and that has everyone feeling good, not just here but across the
The low unemployment in the United States may also be prompting
increased spending, just as it did in the 1990s, as corporations invest in
technology to make workers more productive, or replace them entirely.
Wendy’s is adding self-service kiosks at 1,000 restaurants.
But business executives say the Trump administration deserves credit.
Mr. MacDonald said home builders have benefited from the killing of
regulations written by the Obama administration, including a rule that
broadened the definition of wetlands, which could have restricted home
building in certain areas. The National Labor Relations Board also reversed a
decision that made builders more responsible for the working conditions of
their contractors’ employees.
In some industries, the administration’s actions will allow companies to
engage in activities they might not have been able to otherwise; electric
utilities, for example, might be able to invest in upgrading power plants that
run on fossil fuels, thanks to a promised rollback of Mr. Obama’s Clean Power
Plan to fight climate change.
The Business Roundtable, a corporate lobbying group in Washington,
reported last month that “regulatory costs” were no longer the top concern of
American executives, for the first time in six years. Mr. Zandi said that
regulation was still the top concern in Moody’s survey of business confidence,
but that it was rapidly losing ground to concerns about the availability of labor.
The National Association of Manufacturers’ fourth-quarter member
survey found that fewer than half of manufacturers cited an “unfavorable
business climate” — including regulations and taxes — as a challenge to their
business, down from nearly three-quarters a year ago.
Some industries have seen particularly clear changes in fortune. The
Trump administration has reversed a number of environmental protections
that would have imposed significant costs on energy companies. Mr. Trump’s
appointees to the Federal Communications Commission voted last month to
repeal so-called net neutrality rules, which treated internet services as a
regulated industry, like power lines, and prohibited broadband providers from
charging for faster internet service or from blocking or slowing some websites.
That decision helped prompt Comcast to announce that it would invest
more than $50 billion in infrastructure over the next five years.
The banking industry, in particular, has been buoyed by a relaxed
approach to financial regulation as the Trump administration moves to ease
many of the postcrisis rules put in place to prevent another financial
meltdown. The Treasury Department has issued a series of reports calling for
sweeping changes to rules required under the 2010 Dodd-Frank law, and a
council set up to designate firms that pose risks to the financial system is in
the process of removing those companies from heightened federal oversight.
Mr. Trump has also installed individuals who have publicly questioned
the need for many of the postcrisis rules in major policy roles, including at the
Federal Reserve and the Consumer Financial Protection Bureau. Bank stocks
have been on a winning streak and ended 2017 up more than 15 percent,
according to the KBW Nasdaq Bank Index.
“There has been some regulatory fixes for a lot of industries, and they
would tell you that matters a lot,” said Jamie Dimon, the chairman of
JPMorgan Chase, who also leads the Business Roundtable. “It’s just hard to do
a direct correlation. It doesn’t mean it isn’t real.”
The confidence is translating to industries that have not, as of yet, seen
any obvious benefit or policy changes.
“We have spent the past dozen years or longer operating in environments
that have had an increasing regulatory burden,” said Michael S. Burke, the
chairman and chief executive of Aecom, a Los Angeles-based multinational
consulting firm that specializes in infrastructure projects. “That burden has
slowed down economic growth, it’s slowed down investment in infrastructure.
And what we’ve seen over the last year is a big deregulatory environment.”
Mr. Burke said he expected the actions to speed future projects for his
company, though he declined to offer details, citing competitive risks.
The White House sees its efforts as having their intended effect. Mr.
Trump boasted about his deregulatory efforts last month at an event where he
stood in front of a small mountain of printouts representing the nation’s
regulatory burden and ceremonially cut a large piece of “red tape.”
The chairman of the White House Council of Economic Advisers, Kevin
Hassett, said in an interview that the administration’s freeze on new
regulations, in particular, appeared to have buoyed confidence. Though he
cautioned that it could take years of research to pin down the magnitude of the
effects, he said deregulation was “the most plausible story” to explain why
economic growth in 2017 had outstripped most forecasts.
“Our view is, the ‘no new regulations’ piece has to be more powerful than
we thought,” he said.