That is the topic of my latest Bloomberg column, and here is one part of my argument:
This argument for a corporate tax cut — “let’s borrow more now while rates are relatively low” — is remarkably like the argument that Keynesians have been using for more government infrastructure spending for years. The main difference is that here the spending would be done by private corporations rather than the federal government. You may or may not believe the private expenditures will be more socially valuable than the government expenditures, but if you think we can afford one kind of stimulus we probably can afford the other. And as I said, the private rate of return on investment probably is higher than the government’s borrowing rate, even if you think that government spending would yield higher returns yet.
Of course that argument does not require unemployed resources. On the micro side, I find it amusing when people suggest that the rate of return on government infrastructure is high, but that corporations have nothing better to do than to sit on their cash. It is hard to have it both ways! Imagine arguing that biomedical R&D through the NIH yields high returns, but that pharma investment to commercialize the resulting drugs or devices does not. National parks aside, most government investment is in inputs, and thus for it to have a high marginal rate of return someone on the output side has to have a high marginal rate of return as well.
Here is another part of my argument:
The pessimist might wonder whether companies would take their windfall and invest it at all. Many companies might simply hold the gain in money management accounts. In this scenario, the tax plan probably won’t be worth passing, as American companies would have nothing useful to do with the free resources, even when given a nudge to invest. That should induce a fairly panicky response, including radical deregulation of business and fiscal austerity on entitlements, but I don’t see critics of the tax plan following up on this view consistently.