Is the Trump Economy Helping Ordinary Americans?

Plus, tax cuts and higher prices By Yuval Rosenberg and Michael Rainey The Economy Is Roaring, but Many Americans Are Still Struggling President Trump has touted the strength of the economy this summer, claiming that he [“unleashed an economic miracle”]( by signing tax cuts into law and [boasting]( that this "may be the best economy in the history of our country." The economy is certainly strong — but it’s not as exceptionally robust as Trump has proclaimed, and as Bloomberg reports, many Americans feel that they aren’t personally benefitting from the recent uptick in growth. Bloomberg’s [analysis]( of recent wage trends finds that the big wage increases Republicans promised would result from their tax cuts have yet to materialize. Instead, inflation-adjusted hourly earnings are now slightly lower than they were a year ago (see more on this below). And a Quinnipiac University poll released two weeks ago found that, by a 58-38 margin, voters say the Trump administration isn’t doing enough to help the middle class. (The administration has argued that the wage numbers are weighed down by lower-wage workers entering the labor force.) “People that depend on wages -- and that’s essentially almost everyone except higher-income or higher-wealth individuals -- are not seeing as much benefit from this economy,” Gregory Daco, head of U.S. macroeconomics at Oxford Economics, told Bloomberg. “People at the lower end of the income spectrum are actually more constrained.” A [large new survey]( by the Urban Institute offers evidence of the hardships many American families still face. The survey of 7,588 American adults between the ages of 18 and 64, conducted this past December and January, found that nearly 40 percent of adults reported struggling to pay for at least one basic need last year, including food, health care, housing or utilities. While these difficulties were most common among those with lower incomes, “material hardship extends across the income distribution and affects families both with and without workers,” the authors write. More than 35 percent of families with at least one working adult said they had difficulty meeting at least one basic need. Why it matters: “The findings in this brief show that the existing safety net programs for families and individuals still leave gaps in the assistance they offer to meet basic needs,” the researchers write. “As policymakers consider changes in access to safety net programs, they run the risk of increasing rates of material hardship, which could have detrimental short- and long-term impacts on children and adults.” [Share this story →]( Why Priming the Pump with Tax Cuts Means Higher Prices for Consumers More companies are raising prices, thanks in large part to the increase in demand driven by President Trump’s fiscal stimulus of tax cuts and increased federal spending. Higher demand for products of all sorts is creating an economic environment in which executives feel they can raise prices, Bloomberg [reports]( — a big change from the years following the great recession, during which many companies complained that they had lost pricing power due to sluggish demand. But what’s good news for businesses may not be so good for workers, Bloomberg notes, since recent increases in inflation have consumed most of the modest wage gains seen in recent months. Economists have long puzzled over the cause and effect of price and wage increases, with some arguing that higher prices lead to demands for higher wages while others say that big jumps in worker pay are a key factor driving up prices. In recent months, only higher prices seem to be in play, as the chart below indicates, while wages continue to record lackluster gains, with inflation-adjusted average hourly earnings down 0.2 percent in July on a year-over-year basis. [Share this story →]( Quote of the Day “It is deeply implausible that voters will behave differently due to the very small changes the TCJA [Tax Cuts and Jobs Act] made in their individual take-home pay. The legislation is also poorly situated to mobilize Republican voters, whose support for the legislation was lukewarm. The short-term stimulative effects of the TCJA are also unlikely to matter much, both because the effects are small and because the economy matters less for midterm election results. In the longer term, however, Republicans will likely benefit from the law’s upward redistribution targeted to their donor class.” – Vanessa Williamson, a fellow at the Brookings Institution, in a [new paper]( looking at the potential 2018 electoral impact of the Republican tax cuts Like this newsletter? Tell your friends they can [sign up here]( to get their own copy. We always welcome your feedback. Email yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. Limit on State and Local Tax Deductions Isn’t Depressing Blue State Housing Values Housing prices continue to climb across the U.S., even in areas hit hardest by the new limitation on state and local tax deductions, Jim Tankersley of The New York Times [reports](. Many analysts thought the new deduction rules, which limit state and local tax deductions to $10,000 per household, would depress home values in high-tax states like New Jersey and Connecticut, but the data so far doesn’t show any loss in value. Lawrence Yun, the chief economist for the National Association of Realtors, said earlier this year, “We thought that there would be some impact, but the market is saying, so far, there is not an impact.” Researcher at Zillow did find a slight slowing in the rate of increase for housing values in pricey areas of high-tax states. The growth in home values slowed by 0.6 percent in the top 10 percent of areas that claim the SALT deduction, Zillow found, compared to a 0.3 percent slowdown at the median and no slowdown in the bottom 10 percent. While the data doesn’t point to any net losses, residents in those areas are “giving up hypothetical money that otherwise they would have had,” said Aaron Terrazas, senior economist at Zillow. News - [White House Nixes Second Spending Clawback Attempt]( – The Hill - [Trump's Farmer Bailout Begins. USDA Spends $1.2 Billion to Buy Surplus Food]( – CNN - [Mexico Denies It Will Pay for Border Wall After Trump Repeats Claim]( – Politico - [Pentagon Has No Plans to Again Cancel Large Military Exercises on Korean Peninsula]( – New York Times - [No Price Tag Yet for Trump's Space Force, Pentagon Says]( – Roll Call - [A Trade Deal with Mexico Could Have Big Implications for Drug Patents]( – Axios - [Trump Backer Inhofe in Line to Chair Powerful Senate Armed Services Panel]( – Reuters - [A Jolt to the Jugular! You’re Insured but Still Owe $109K For Your Heart Attack]( – Kaiser Health News - [How the Opioid Crackdown Is Backfiring]( – Politico - [America’s Suicide Crisis Is Worse Than We Thought]( – Bloomberg - [South Dakota Asks Trump Admin to Approve Medicaid Work Requirements for Parents, Caretakers]( – The Hill - [Commenters on Kentucky’s Proposed Barriers to Medicaid Coverage Are Over 20 to 1 Against Re-approval]( – Kentucky Center for Economic Policy - [Top Interior Staffer Who Backed Shrinking National Monuments to Join BP]( – Washington Post - [Colorado Grapples with Underfunded Schools Beneath a Booming Economy]( – Axios - [How the Cost of Substitute Teachers in St. Paul Rose $2.7M in Four Years]( – TwinCities.com Views and Analysis - [Trump Cannot Be 'King of Debt' When It Comes to Government]( – Kristin Tate, The Hill - [You Can Wager Democrats Will Talk a Lot About Wages]( – Jennifer Rubin, Washington Post - [Trump’s Deal with Mexico Is Better for Workers Than Prior Trade Deals]( – Jared Bernstein, Washington Post - [Trump’s Mexico Trade Deal Looks Like a Lemon]( – David Fickling and Anjani Trivedi, Bloomberg - [What John McCain’s Death Means for Republican Control of the Senate]( – Russell Berman, The Atlantic - [Pentagon Will Miss John McCain, Its Friend and Foe]( – John M. Donnelly, Roll Call - [Elizabeth Warren’s Theory of Capitalism]( – Franklin Foer, The Atlantic - [Toward A Smaller, Smarter Force Posture in the Middle East]( – Defense One - [Rolling Back Energy Regulations Will Not Work Any Wonders for America]( – Amy Myers Jaffe, The Hill - [Trump’s Student Debt Policies Are Mind-bogglingly Corrupt]( – Eric Levitz, New York - [Virginia’s Health-Care Crisis Has Not Been Solved]( – Peter Galuszka, Washington Post - [Minnesota's Next Governor Faces a State Health Care Fiscal Cliff]( – Star Tribune Editorial Board Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. 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