|I just attended a conference where J.P. Morgan Chase bankers made a bold prediction about the impact of a law Congress passed last October.
The bill, which would provide a one-time reduction in the tax rate on foreign earnings that companies repatriate, would bring back to the U.S. an estimated $350 billion in earnings, according to the J.P. Morgan bankers. And because companies must use the money for activities unrelated to executive compensation, dividend payments, or share repurchases, the bankers expect it to increase direct investment and capital spending in the U.S. by 4 percent, most of it by manufacturers and pharmaceutical companies. The bankers says that will translate into anywhere from .75 percent and 1 percent of additional GDP growth, and 600,000 new jobs over the next year.
Could the inflow go some distance toward strengthening the dollar and reducing the current account deficit? The Fed is expected to weigh in on those issues in a report due out in about two weeks. Who says the U.S. doesn’t have an industrial policy?