It's Still the Economy, Stupid

AP Photo/Richard Drew

The logo for Wells Fargo appears above a trading post on the floor of the New York Stock Exchange

By focusing attention on issues such as immigration and Korea, Trump has managed to deflect attention from the economic resentments that helped get him elected—namely, outrage that the rules are rigged on behalf of the wealthy and the powerful. 

Will he keep getting away with this, as Republican policies make the rich even richer and regular people more economically precarious? That depends on how astutely blue wave candidates keep pocketbook issues at the forefront.

Exhibits A and B of the Republican doubling down on corrupt plutocracy are the 2017 Tax Act and the coddling of the biggest banks. The Tax Act costs $1.9 trillion in revenue over a decade. Almost all of the breaks went to rich individuals and corporations, but it was supposed to produce trickle-down benefits in the form of more jobs and better pay for workers. 

Now the verdict is on pay increases. Worker pay was flat in the past 12 months, according the Bureau of Labor Statistics. 

And instead of increasing domestic investments that might produce jobs, corporations mainly used the money to buy back shares of their own stock, pumping up the share value in order to further enrich executives and shareholders but doing nothing for the economy. 

The fraudulence of the Tax Act, as a potential big winner for Democrats this fall, is the subject of the Prospect’s entire summer issue—and disparities have only increased since we went to press.

According to the latest tabulation by Americans for Tax Fairness (ATF), the total value of share buybacks has been $503 billion since the tax act was passed in last December. Corporations have spent 72 times on share buybacks what they have spent on one-time worker bonuses and raises. About 40 percent of all stocks are held by the top one percent, and most of the rest by the wealthiest ten percent, so this is a pure gift for the rich.

Meanwhile, the Federal Reserve keeps freeing banks from the consumer protections of the Dodd-Frank act and other safeguards of the Obama era. Last month, the Fed and other regulators conducted rigged “stress tests,” whose results allowed then to reduce the capital reserves they are required to keep against losses. With more lenient capital requirements, the big banks are now freer to join the parade of stock buybacks and dividend payouts.

The six largest banks will use $125 billion on buybacks and payouts. A lot of this capital that might have otherwise financed loans. 

According to a tabulation by The New York Times, Wells Fargo and Citigroup are spending more than 100 percent of their projected 2018 profits on buybacks and dividend payouts, and JPMorgan Chase 98 percent. 

The most important impact of the tax act will be pressure to cut spending in popular programs such as Social Security and Medicare, to make up the gap. And according to the nonpartisan Congressional Budget Office, the Tax Act, by pushing the national debt to an unprecedented 152 percent of GDP, increases the odds of a new financial crisis. 

And Trump’s trade policy, despite its Make-America-Great-Again bluster, is starting to undermine good American jobs, by disrupting supply chains and shrinking markets for US exports—but without doing anything serious to alter China’s predatory practices. 

He even managed to make the iconic Harley Davidson the enemy.

In sum, Trump tax and regulatory policies for banks and corporations mainly allow these institutions to fatten themselves, not to help the larger economy, while his tough trade measures are perverse.

The key political question is whether voters will connect these dots and hold Trump and the Republicans accountable for the blatant hypocrisy and bait-and-switch. The corporate elite and their Republican allies are counting on voters to be deceived by the sheer complexity of tax, trade and regulatory policy changes, and for hot button issues like immigration to rev up their own base.

Polling and focus group research shows that pocketbook issues are big winners for Democrats. The question is whether Democrats will make this the big theme of the midterms.

Democrats are right to express outrage about Trump’s immigration policies. What’s tricky is that calls to abolish ICE allow Trump and the Republicans to falsely claim that Democrats are for totally open borders. In fact, if you look closely the statements of the amazing Alexandria Ocasio-Cortez, the call here is to go back to long established agencies like the Immigration and Naturalization Service, which did not smack of a police state.

But voters may not read the fine print, and Democrats need to be careful not to play into Trump’s hands. The Democratic high ground is to remind voters that Trump is no friend of the working person. The more the fall elections stay focused on that core issue, the better Democrats will do.

An earlier version of this article appeared at The Huffington Post. Subscribe here

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