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 homebuilder in Kerrville, Texas. “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 Donald Trump’s approach to social and cultural issues, including his response to a white nationalist march over the summer in Charlottesville, Virginia, that turned deadly and his decision to withdraw from the Paris climate accord. Two of the business advisory councils that Trump assembled in the nascent days of his presidency disbanded after executives grew concerned about his public remarks on the violence in Charlottesville, Virginia.
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 Trump’s more hands-off approach has unleashed the “animal spirits” of companies that had hoarded cash after the recession of 2008.
Some businesses will essentially be able to use shortcuts 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 Trump, that would have protected streams from mining runoff.
Brett Hartl, government affairs director at the Center for Biological Diversity, said the 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,'” 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 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, 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 back.
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.
Administration officials said last month that since last January, 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.