What struck me listening to President Trump’s State of the Union address on Tuesday night was how much economic good news he inherited from President Barack Obama. Like the crowing rooster who claims credit for the sunrise, Trump would like us to think that all good things are attributable to him. In fact, the average monthly jobs numbers (174,000 per month in 2017 vs. 187,000 per month in 2016) and the stock market were both stronger in 2016 than they were last year. Politifact.com wrote: “The Dow’s rise was even more impressive under Obama if you start measuring at the market’s low point, on March 9, 2009, during the depths of the Great Recession. That day, the Dow closed at 6,547. Between then and Jan. 5 — a 10-month period — the Dow rose by a stunning 61 percent. That’s more than three times faster than Trump’s rise over the same period in his term.”
Trump, desperate for praise, has hung his hat on those two misleading and unstable indicators — the stock market and job gains after the tax cuts (which were mostly aimed at corporations). The Wall Street Journal reported: “The Dow Jones Industrial Average fell 363 points Tuesday, its second straight day of triple-digit declines and worst day since August, amid a slide in health-care shares and worries over rising bond yields.” No one would honestly claim Trump was responsible for those losses. Why then attribute the gains to him? Markets go up and do down. A president who wants to tie his record to the stock market takes a big gamble. As a senior adviser in the Obama administration ruefully observed: “Rookie mistake.”
There is another problem with tying “success” to the markets. A larger share than you might imagine do not take part, even through pension and 401(k) funds. “Fewer than 14 percent of American households directly own stock in any company,” The Post reported last year. “Even when you consider indirect ownership via 401(k) retirement accounts and similar vehicles, fewer than half of American households own any stock at all.” Moreover, “like income and wealth, stock ownership is heavily concentrated in the uppermost echelons of the economy. The bottom 60 percent of households combined own just 1.8 percent of American stock. The top 1 percent, by contrast, owns over 40 percent of the country’s stock, up from 34 percent in 2001.” The shout-out on the market then is akin to bragging that the rich continue getting much richer under Trump.
Don’t get me wrong. A booming stock market is better than a bear market. However, Trump’s election pitch was not aimed at the top 1 percent, but at the “forgotten men and women.” His reliance on stock market figures — aside from its political risk and tenuous connection to the president — mean the forgotten men and women are largely still forgotten.
Then there are all the bonuses and raises from the tax cuts! This is economic hocus-pocus. The best business reporting has debunked this connection. CNBC reported that its Fed survey indicated that “most respondents didn’t see much going to workers.” Companies told a far different story than the Trump administration: “About 36 percent is seen being used to buy back shares (22 percent) and dividends (14 percent). Debt reduction is forecast to get the next biggest piece of the pie at 13 percent. Workers are estimated to get just 12 cents of every dollar of additional savings from the corporate tax cut. This would amount to much less than estimated by Trump administration economists, who have argued that workers could reap 70 or 80 cents of every dollar of corporate tax relief.”
Moreover, the notion that the raises and bonuses are Trump’s doing raises its own problems. For starters, the administration said those wage increases would result from greater productivity, not from the goodness of corporate CEOs’ hearts. Productivity hasn’t changed dramatically in a month or so. Moreover, as economist Larry Summers pointed out to CNBC, “I think in many cases the firms have to raise wages because labor markets are tight, and so why not curry some favor with the White House by linking it to the tax cuts.” The number of firms handing out one-time bonuses rather than permanent raises is a telling sign workers shouldn’t count on higher wages in the future.
If Trump takes credit for the good, I suppose he should also take “credit” for the stock buybacks, the layoffs and the closings. The Hill reports: “Democrats are hammering home the argument that the bill is primarily for the rich by highlighting the companies that have announced stock buybacks and layoffs since the tax law was passed. Some of the companies that have announced layoffs, such as Walmart and AT&T, also announced bonuses.” And Axios reported: “Comcast announced 100,000 bonuses of $1,000, while around 500 managers, supervisors, and salespeople were fired. AT&T announced 200,000 bonuses of $1,000, while laying off thousands. Walmart announced minimum hourly wage raises to $11, and offering $1,000 bonuses; on the same day it announced the layoff of ‘thousands of workers.’ ” Again, it’s a dangerous game to buy into corporate spin.
The one group that plainly is happy and directly benefits from Trump’s tax cuts are GOP donors. Politico reports:
Attendees at a weekend retreat . . . for donors and operatives affiliated with the political network helmed by brothers Charles and David Koch cited the GOP’s legislative breakthrough last month as a main reason for their renewed optimism heading into the midterms. The sense that donors wouldn’t reach for their wallets for the 2018 elections has all but evaporated following the enactment of legislation overhauling the tax code, which delivered a number of long-standing conservative policy goals.
“Luckily, the Senate passed tax reform and someone came up with the brilliant idea of repealing the individual mandate — which essentially shoots a hole in the boat of [the Affordable Care Act] so it will die a slow, simple death,” Texas-based donor and fundraiser Doug Deason said. “The gravy was drilling in [the Arctic National Wildlife Refuge], which Republicans have wanted forever.” . . . There are signs spending is beginning to pick up among the donor class — even before tax reform was done. House Republicans cashed their first big checks of the midterm election cycle from Charles Koch and his wife, Elizabeth, shortly before the final tax bill cleared Congress. The pair donated close to $1 million at the end of November, campaign finance records show.
So sure, the Trump economy has improved tremendously for the very rich, for corporate shareholders and for the GOP entities that get thank-you checks from donors. Somehow, I don’t think that is what voters had in mind when they heard “middle class tax cut.”