Wayne O'Leary

Wages of Trump: The Sequel

When I last visited the scene of the crime (Donald Trump’s tax cuts) earlier this past summer, Republicans were maniacally beating the drums of imminent wage growth like an army of crazed Gene Krupas. A lot has changed in three months. The GOP is standing by its patter, but somehow there’s been a loss of certitude.

The line that everything’s coming up roses because of reduced high-end taxes has not caught on as a campaign issue for the midterms. There’s a good reason: things are not really improving on the wage front despite the propaganda emanating from the party in power. You can’t say the sons of the wild elephant aren’t trying, however.

In mid-September, the president’s Council of Economic Advisors hailed a Census Bureau report that US median household income grew by 1.8% in 2017 to an all-time high of $61,372. It was “huge news” for the middle class, Trump’s economists proclaimed, validating the GOP campaign slogan that workers are “better off now” after two years of conservative trickle-down policies. “The effects of the strong economy are reaching Americans throughout the United States,” they gloated.

A closer look reveals something else. First, the 1.8% income rise pales next to those of 2015 (5.2%) and 2016 (3.2%). Secondly, as the Census Bureau points out, the median income for last year was indistinguishable from that of 10 years earlier, just prior to the start of the financial crisis.

There was no genuine improvement during what the New York Times calls the “lost decade” (2007-17) of the middle class. The illusion of progress was a function of increased household employment (more family members with jobs), not increased pay. In 2017, average annual earnings per worker actually declined, but were offset by a larger labor force produced by the nation’s dip in unemployment.

Census analysts added one more troublesome caveat to the mix. While America’s middle-class incomes remained largely static between 2007 and 2017 in the face of a healthy 16% rise in the gross domestic product (GDP), even falling 4.5% for the poorest one-tenth of earners, one group came out well ahead as usual: the top tenth gained 7.5% in income over the last decade.

But hang in there, middle-class skeptics. Good news is on the way — at least according to Council of Economic Advisors Chairman Kevin Hassett, an American Enterprise Institute alum, who together with his colleagues issued a report last fall predicting the then-pending Trump corporate tax cut alone would raise annual household incomes by $3,000 to $7,000.

The expected gains remain “on track,” Hassett insists a year later. Corporate reductions will still spur increased investment leading to accelerated productivity and higher worker pay, but (since the giveaways have been going almost exclusively toward share buybacks) it may take just a little longer to make America great again — say three to five years, or well into the Donald’s second term.

This is the same Kevin Hassett, incidentally, who achieved minor notoriety in 1999, when he co-authored (with James K. Glassman) the absurd treatise Dow 36,000, which predicted a tripling of the stock market shortly before the dot-com crash. The Dow subsequently topped out at under 12,000 and has yet to reach 27,000 two decades later, so Hassett’s track record as a prognosticator leaves something to be desired.

But back to wages. Turning from overall household incomes to individual wage rates creates another problem for Trump’s boosters: they have to contend with those notoriously crotchety gnomes at the Bureau of Labor Statistics (BLS), famous for delivering what disbelieving Republicans regard as “fake news.”

On the plus side for GOP partisans, so-called nominal wages (wages prior to factoring in inflation) are up over last year at this time by 0.1% on an average weekly basis. Unfortunately, the BLS gnomes have data showing real weekly wages actually declined over the period (Aug. 2017 to Aug. 2018) by 0.2% adjusted for inflation, as measured by the Consumer Price Index.

The disparity between nominal wages (up 2.7%) and inflation in goods and services (up 2.9%), the latter propelled by surging oil and gasoline prices, has produced not a “Trump boom,” but a “Trump wage slump.” Contrary to confident forecasts by the White House, real wages for typical workers have not grown at all since 2017, despite GDP growth (worker productivity) approaching 4%.

Faced with that unpleasant reality, what’s a creative Trump economist to do? Kevin Hassett and company have the answer: simply manipulate the numbers to fit political needs. Presented with BLS evidence of a 0.2% drop in inflation-adjusted weekly wages for 2017-18, the president’s Council brazenly issued a contrary report using alternative facts to support an opposite claim of increased wages over the past year.

The Republican-adjusted wages Hassett conjures up register not a decrease but a full 1% increase, which swells to 1.4% when the Trump tax cuts are bizarrely included as a form of compensation. The GOP’s Merlin uses his magic economic wand to wave away the Consumer Price Index, offering as a replacement something called the “personal consumption expenditures index.”

This Federal Reserve calculation device arbitrarily allows the inclusion of not only tax cuts, but growth in nonwage benefits like health-care coverage and paid leave! It also offsets the statistical impact of younger, lower-paid workers entering the work force, permitting an upward adjustment in average wage growth.

In Kevin Hassett’s world, a paycheck alone does not constitute a wage; total compensation, everything really, constitutes a wage. Theoretically, sick days and vacation times, or even 401(k) sweeteners, could be factored in — anything to avoid measuring cash, which corporate America is increasingly loath to dispense. For statistical purposes, up is down and down is up. Don’t forget, as Rudy Giuliani informed us, there is in the end no objective truth.

Assuming you nevertheless accept the obvious fact that, despite benefit shuffling and double talk, real wages are not rising for American workers, Republican officialdom has a ready-made, faith-based response. Offering no immediate solution, Donald Trump’s Federal Reserve Chairman Jerome H. Powell says stagnant middle-class wages will be lifted eventually by a strong economy and low unemployment. In the meantime, he suggests, get more education, but (it need not be said) don’t unionize.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, November 1, 2018

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