President Donald Trump heads into a midterm referendum on his presidency showing no real progress on a core promise: to raise the wages of America’s “forgotten man and woman.” Once the impact of inflation is included, ordinary Americans’ hourly earnings are lower than they were a year ago. Real wages have remained mostly stagnant despite an expanding economy, record stock prices, soaring corporate profits and a giant deficit-fueled stimulus from Trump’s tax cuts that took effect Jan. 1. The Trump administration claimed its policies would immediately boost wages, with its tax overhaul ultimately increasing average pay by $4,000 to $9,000. That hasn’t happened. And though Trump regularly boasts of the economy’s performance, many Americans don’t feel they’re sharing in the gains — a risk for Republicans as they seek to defend their House and Senate majorities in November elections.
A majority of voters believes their personal financial situation has remained the same or gotten worse over the past two years, said Tim Malloy, assistant director of the Quinnipiac University poll. “When you look at that backbone of the country — the middle class — people think that there’s stagnancy and not much has happened for them,” although “things might be marginally better nationwide,” he said. “That could be a problem in the midterms for a lot of people. At least some people believe that promises were not fulfilled.” Inflation-adjusted hourly wages dropped 0.2 percent in July from a year earlier, their worst reading since 2012, according to the Labor Department, amid faster price gains. They’ve grown at an average 0.3 percent annual pace under Trump overall, compared with 1.1 percent during Barack Obama’s second term.
As a candidate, Trump excoriated his predecessor for slow growth in American workers’ incomes. “Household incomes are over $4,000 less today than they were 16 years ago,” he said during a campaign rally in Pensacola, Florida, in September 2016. “We’ll get your salaries and your wages up, up, up.” Workers are still waiting. By a margin of 58 percent to 38 percent, U.S. voters believe the Trump administration isn’t doing enough to help middle-class Americans, according to a Quinnipiac University poll released Aug. 14.
Trump has been telling voters that wages already are rising at historic rates, though economic data don’t show it. In various recent speeches, he has falsely claimed that wages are going up for the first time in 18 years, 19 years, 20 years, 21 years and 22 years. “We have so many jobs now coming in, but they’re raising wages,” Trump said last month at a roundtable event in Iowa. “The first time that’s happened in 19 years, where wages are going up.” Average hourly earnings — not accounting for inflation — rose 2.7 percent in July from a year earlier, the same pace as the 12-month period before Trump’s election. They’ve been rising at an average 2.2 percent pace since the recession ended in mid-2009. Trump’s claim is also belied by other measures of wages often used by economists, including the employment cost index and the Federal Reserve Bank of Atlanta’s wage-growth tracker.
Tepid wage growth throughout the current economic expansion also bedeviled the Obama administration and remains one of the biggest challenges even with unemployment near the lowest level since 1969. On top of that, workers are failing to reap benefits of legislation cutting corporate taxes, an outcome predicted by some economists before Congress passed the law in December. “It was our expectation that the major elements of the tax plan likely wouldn’t trickle down into stronger wages for the average worker,” said Michael Gapen, chief U.S. economist at Barclays Plc. “It was more likely to go as returns to shareholders.”
Companies in the S&P 500 index are set to authorize $1 trillion in stock buybacks in 2018, a record and a 46 percent jump from last year, according to an estimate this month from Goldman Sachs Group Inc. Only 37 percent of Americans approve of the tax package, compared to 45 percent who disapprove, according to a Monmouth University poll released Aug. 20. Such unpopularity is hampering Republicans who had hoped the law would give them a boost in midterm elections. One in four Americans don’t think they’re “at least doing OK” financially, and more than one in five respondents said they were unable to pay the current month’s bills in full, according to the results of a late 2017 Fed survey released in May. “People that depend on wages — and that’s essentially almost everyone except higher-income or higher-wealth individuals — are not seeing as much benefit from this economy,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York. “People at the lower end of the income spectrum are actually more constrained.”
Voters who disapprove of the Republicans’ tax cut are not being contrarians or hyper-partisans. They have every reason to believe the tax cut doesn’t solve their underlying economic predicament. In this regard, President Trump is performing far worse than President Barack Obama did — and if his trade wars don’t end quickly, he will do even worse. For now, the task for Democrats is easy. They can run on a tried-and-true theme: The GOP gave big tax cuts to the rich and to corporations, promised a huge boost in everyone’s wages and did not deliver. No one said this was easy, but thanks to the GOP hype, for now Democrats can rightly claim Trump and Republicans pulled a bait and switch on the voters.
Despite a strong economy, about 40 percent of American families struggled to meet at least one of their basic needs last year, including paying for food, healthcare, housing, or utilities. That’s according to an Urban Institute survey of nearly 7,600 adults that found that the difficulties were most prevalent among adults with lower incomes or health issues. But it also revealed that people from all walks of life were running into similar hardships. The findings issued Tuesday by the nonprofit research organization highlight the financial strains experienced by many Americans in an otherwise strong economy.
The average unemployment rate for 2017 was 4.4 percent, a low that followed years of decline. But having a job doesn’t ensure families will be able to meet their basic needs, said Michael Karpman, one of the study’s authors. Among the households with at least one working adult, more than 30 percent reported hardship. “Economic growth and low unemployment alone do not ensure everyone can meet their basic needs,” the authors wrote. Food insecurity was the most common challenge: More than 23 percent of households struggled to feed their family at some point during the year. That was followed by problems paying a family medical bill, reported by about 18 percent. A similar percentage didn’t seek care for a medical need because of the cost. Additionally, roughly 13 percent of families missed a utility bill payment at some point during the year. And 10 percent of families either didn’t pay the full amount of their rent or mortgage, or they paid it late. While startling data to some, it comes as no surprise to those Americans who are struggling to get by.
The economy has come a long way from the dark days of 2008, when the collapse of Lehman Brothers and the bailout of big banks led to worldwide economic disaster. For much of the last decade, the economy has been growing and the stock market has been rising. But this steady climb is lulling bankers, lawmakers and regulators into repeating mistakes that contributed to that crisis and cost millions of people their jobs, homes and savings. The financial system and economy are clearly on much firmer ground than they were a decade ago. Wages are barely keeping up with inflation, but the unemployment rate, which climbed as high as 10 percent, has fallen to 3.9 percent. The housing market, once crippled by foreclosures, has sprung back to life, with home prices scaling new heights in many parts of the country. Banks, once dependent on taxpayer dollars to keep their doors open, are raking in profits. Yet the economy has still not fully recovered. The per capita gross domestic product of the United States is about $70,000 smaller over the average person’s lifetime than it would have been had the economy stayed on the trajectory it had been on before the crisis, according to a recent analysis published by the Federal Reserve Bank of San Francisco. The authors of that report — Regis Barnichon, Christian Matthes and Alexander Ziegenbein — conclude that the economy is “unlikely to regain” that lost ground, a stunning acknowledgment of the permanent and significant costs of avoidable financial crises.
Of course, averages obscure a lot. Americans have not shared equally in the losses from the crisis. Families of modest means have far fewer, or in many cases zero, assets; they may have lost their homes and their savings. The average family of three earning less than $42,500 a year saw its net worth chopped nearly in half, to $10,800 in 2016, from $18,500 in 2007, the Pew Research Center found. Wealth of families earning $42,500 to $127,600 fell by nearly a third, to $110,100. Yet, the wealth of affluent families who earn more than $127,600 jumped nearly 10 percent, to $810,800. The crisis and the government response to it worsened longer-term trends that have caused wages to stagnate for most families while rewarding the top 1 percent with an ever-bigger slice of the economic pie. Obama officials and Congress clearly made a big mistake early in the recession by focusing more intently on saving banks — and, thus, bankers and investors — and much less on directly helping families facing foreclosures and layoffs. Later in the recovery, the decision by Republican leaders in Congress to oppose every Obama proposal prevented the government from doing much to help people regain what they had lost or to heat up the tepid recovery with infrastructure spending and other stimulus measures. Before the crisis, the share of economic output that went to workers had been falling steadily since early 2001, when it stood at 64 percent. After the crisis it plunged to about 56 percent, according to the Bureau of Labor Statistics, rising only slightly in the last few years. This is because as workers’ incomes have stalled, corporate profits have shot up.
And the regulations that were dismantled and eliminated could have helped prevent or reduce the severity of the last crash. Mr. Rajan, who was prescient in warning about the last crisis, said it’s unwise to deregulate now because businesses and individuals have borrowed a lot of money in recent years in the United States and other countries, raising the risks of economic problems down the road. With investors bidding up stock prices and pouring billions of dollars into money-losing start-ups as if nothing could go wrong, it is all the more frightening and infuriating that officials have so quickly tossed aside the lessons from the last crisis. In making life grander for the most comfortable Americans, the government is putting everyone’s economic prospects at greater risk.
President Trump ended the nuclear threat from North Korea. Except he didn’t. President Trump went to Brussels and extracted big concessions from NATO allies. Except there’s no actual evidence of that. President Trump hailed a “breakthrough agreement” with the European Commission to avert a trade war. Except it was basically just an agreement to talk, with no concrete policy shifts. And now we can add one more to the list. Trump took to the Oval Office on Monday morning to hail “maybe the largest trade deal ever made,” with Mexico — a deal that allowed him to “terminate” the North American Free Trade Agreement, as he’s longed to do. Except neither of these things are even close to being substantiated. And it’s patently obvious that Trump has yet again claimed a major diplomatic victory that is completely premature at best and completely fictional and fanciful at worst. No, it may not be surprising anymore. But it is worth noting just how much the president is exaggerating/inventing in regard to something with such serious real-world consequences for U.S. workers. The Weekly Standard’s Haley Byrd has a must-read piece on how even Republican senators are pooh-poohing Trump’s announcement. Trump’s “deal” is basically that the United States and Mexico have come to terms and are moving forward, with Canada welcome to try to join. The problem is that the actual rules and basic arithmetic make it very unlikely that NAFTA could so easily be reduced from a three-party agreement to a two-party one. Trump’s threat to move forward without Canada seems rather empty.