Here he goes again. At 8:49 this morning, President Trump tweeted this out:
Yes, Trump thinks he is responsible for — well, everything that’s good. He has taken credit for the strong stock market multiple times and also took credit for “record” retail sales. (He was probably referring to strong holiday sales. I need to point out that spending records were set on both Black Friday and Cyber Monday, while the fate of the tax bill was still somewhat in doubt.)
This is all ridiculous, and it needs to stop. Trump is taking credit for ongoing economic trends, trends that predate his entering the White House. That also applies to Trump’s boasts about why companies are handing out those bonuses.
Yes, it’s true that a number of companies that are giving bonuses to workers say it’s because of the tax bill. AT&T, otherwise locked into a battle with the Trump administration over a planned merger with Time Warner, was the first, but it’s hardly alone. Among the others that announced bonuses, there’s Sinclair Broadcasting and Comcast (a beneficiary of the rollback on net neutrality.) AccuWeather, whose chief executive Barry Myers is set to join the Trump administration as head of the National Oceanic and Atmospheric Administration, was yet another.
But bonuses are, by definition, an irregular, voluntary, often one-time event. They are not a firm commitment to better pay. A company can give them once and never give them again. Or they can give a different, smaller amount the following year. They are not the stuff long-term personal finance plans are made of. When they go away, there is nothing to replace them. It’s back to the same old-same old.
True, a handful of companies announced pay raises, claiming the tax bill as their spur to action. First Farmers Bank & Trust in Indiana, for instance, announced they would raise the minimum pay of new workers by $2.50 an hour and give full-time workers a one-time $750 bonus. Wells Fargo is implementing a $15 minimum wage for its employees.
But this is also probably less than meets the eye. The United States is currently in the eighth year of an economic expansion, and employers are now constantly whining about how they cannot find enough workers. In this environment, a pay increase is exactly what you would expect to see, regardless of a tax cut. And that has already been happening. As Bess Levin pointed out in Vanity Fair, only a few months earlier, Wells Fargo announced it was raising its starting wage to $13.50. In other words, the pay the company was offering workers was already going up.
So why did companies make announcements timed to the tax bill? This is very likely a strategy to curry favor with a thin-skinned president known to like flattery. If so, it’s working. Trump himself has mentioned it any number of times. Trump pointed it out at the signing ceremony for the bill, saying: “AT&T plans to increase U.S. capital spending $1 billion and provide $1,000 special bonus to more than 200,000 U.S. employees. And that’s because of what we did.”
As we all know, Trump is prone to saying nice things about companies he likes (Hi, Carrier!) and not so nice things about those he is angry with (Hi, Macy’s!). If you are running a business, it’s fairly basic governance to want the president of the United States singing your praises. There are potential consequences to making him unhappy. Trump, for example, is known to call this publication the “Amazon Washington Post,” a reference to The Post’s owner, Jeff Bezos. Last week, when he tweeted about financial losses at the U.S. Postal Service, he singled out “Amazon and others” as the recipients of low shipping rates. Note the one company he named.
Similarly, there are suspicions that the AT&T-Time Warner merger has attracted the attention of the Justice Department because of Trump’s ongoing ire with CNN, which is owned by Time Warner. (I need to note here that AT&T denies the Justice Department action has anything to do with its decision to offer employees bonuses.)
And, of course, bonuses and pay raises are hardly the only story here. AT&T, for one, apparently is also quietly laying off workers. Officials of the Communications Workers of America, the union representing many front-line AT&T workers, told USA Today they believe about 4,000 workers have been notified that they will be laid off. Trump has had nothing to say about that, at least that I am aware of.
The biggest beneficiaries of the tax bill over time will not be the workers getting one-time bonuses and not those getting raises it’s quite possible they would have received regardless, but the owners of substantial amounts of stock. According to a tally kept by Reuters, at least two dozen companies have announced buybacks and dividend increases since the tax bill vote. The idea that these companies simply decided they would make so much money from the tax bill that they would suddenly give out bonuses after the bill passed just doesn’t pass the smell test.