The financial crisis was most disastrous for housing, but it was terrible for all kinds of investment. After accounting for the wearing out of equipment and buildings, most sectors of the U.S. capital stock are barely being replenished fast enough to make up for depreciation. The U.S. is doing little to expand its capital stock and is instead mostly just holding on to what it has.
The chart below shows net investment, which is all investment in physical capital minus the lost value of previously purchased physical capital due to wear and tear.
The low investment in corporate structures and equipment helps explain why wage growth has been so sluggish. Tax reform, which lowers the cost of capital, could increase investment and grow the economy.
For more charts like this, please see our new chart book, Business in America: Illustrated.
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