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Defying the Odds

Defying the Odds
New book about the 2016 election.

Saturday, August 4, 2018

Taxes, Wages, and Rich People

In Defying the Odds, we talk about the economic divides that enabled Trump to enter the White House.  In 2018, however, those divides may be working against the GOP.  Trump promised that his tax cut would help average Americans, but it has been unpopular.

Indeed, the Democrats could run this 1982 ad, with almost no changes.



Now that enough time has elapsed since the passage of the tax cuts for economists to begin analyzing the data, it's clear that while many Americans may be seeing a bit more money in their paychecks as a result of the new tax breaks, the promised wage growth and business investment have yet to materialize.

A report from the Center for American Progress , a liberal think tank in Washington, points to the following in particular:
  • Real average hourly earnings (adjusted for inflation) for all employees on private nonfarm payrolls were totally unchanged in June from one year earlier.
  • Real average hourly earnings the approximately 80% of workers categorized as "production and nonsupervisory employees" edged 0.2% lower over the same period.
  • Real median weekly earnings have also decreased slightly.
Wages were up 2.7% for the 12 months that ended July 31, the same annual pace as in
Consider that, while average hourly earnings are growing at an annual rate of 2.7%, the consumer price index for the 12 months that ended June 30 was up 2.9%. That means the purchasing power of Americans went down during that period.

A broader measure of inflation used by the Federal Reserve, based on total personal consumption expenditures, showed an annual rate of 2.2% for the 12 months that ended June 30. That means purchasing power has improved, but not much, in the last year.

The Labor Department tracks inflation-adjusted wages — known as real average hourly earnings. The most recent report, in June, showed a 0.1% increase in those earnings since May.

However, inflation-adjusted wage growth was flat in June compared with a year earlier for the second month in a row. Annual growth in real average hourly earnings was running about 2% in 2015 because inflation was much lower then.
Patrick Temple-West and Victoria Guida at Politico:
 Some of the biggest winners from President Donald Trump’s new tax law are corporate executives who have reaped gains as their companies buy back a record amount of stock, a practice that rewards shareholders by boosting the value of existing shares.
A POLITICO review of data disclosed in Securities and Exchange Commission filings shows the executives, who often receive most of their compensation in stock, have been profiting handsomely by selling shares since Trump signed the law on Dec. 22 and slashed corporate tax rates to 21 percent. That trend is likely to increase, as Wall Street analysts expect buyback activity to accelerate in the coming weeks.