That Raise You Were Promised Last Year? Wall Street Took It From You

Trader Michael Urkonis, right, works on the floor of the New York Stock Exchange early this month. Most of the more than $1 trillion federal tax cut benefiting corporations went into stock buybacks, not raises for rank and file workers. (Photo: Richard Drew/Associated Press)

That Raise You Were Promised Last Year? Wall Street Took It From You

Believe it or not, there are actually things that Congress can do to ensure that working-class people get their raise, which don’t involve throwing wads of cash at a CEO and hoping he won’t blow it all on his fifth vacation home

Wayne Garnett, a 38-year-old parking-lot attendant who lives in North Philadelphia and works in Center City, doesn't really know whether or not the tax cut passed last year by a GOP-led Congress and signed by President Trump has saved him a couple of bucks in his biweekly paycheck.

Garnett said that's because his pay stub -- at his hourly rate of just $9.52 -- is so meager he hates to spend time looking at it. "I'm scared to look at my paycheck -- I just hope that I make my 80 hours and that they don't take any more money out," he told me.

He's already paying extra for his health insurance that he admits he might not have purchased if not for the tax penalties under Obamacare. Unmarried and with his children mostly grown, Garnett said he recently moved back in with his mom and stepfather -- "it's embarrassing, but sometimes you gotta do what you gotta do."

Garnett -- who works for a nationwide company called LAZ Parking -- has begun pressing along with some of his coworkers in the Philadelphia parking business for a pay raise, aided by labor organizers.

They're hardly alone.

By and large, American workers haven't been getting the kind of pay raises that history predicts for an economy with such a low unemployment rate. That's even more astounding when you remember 2017's $1.5 trillion tax cut that was heavily weighted toward large corporations, with the promise that -- this time, we swear -- a lot of those dollars would trickle down to the rank-and-file worker.

Now, the post-tax-cut numbers are coming in, and you'll be shocked, shocked to learn that America didn't get that pay raise after all. In a widely read column last week for Bloomberg, Noah Smith pointed to statistics from PayScale showing that so-called real wages -- your paycheck, but adjusted for inflation -- actually fell in the just-ended second quarter of 2018, by 1.8 percent.

That's adding insult to injury for America's middle class. Real wages for the average worker have dropped since 2006, with an overall decline of 9.3 percent, including these ugly new numbers. The GOP/Trump tax cuts were supposed to fix that problem, not make it worse.

More broadly, the nation's failure to collect a pay raise even with unemployment hovering around the 4 percent mark has befuddled even some of the best economists. Over a recent 12-month period, average U.S. paychecks -- not adjusted for inflation -- grew by about 2.7 percent, or roughly the same as the rise in the cost of living. In past eras with similar jobless rates, according to economists, you'd expect a number closer to 3.5 or 4.5 percent, at least.

Where did the money -- especially the hundreds of billions from last year's tax cut, which reduced the top corporate tax rate from 35 percent to 21 percent -- disappear to? The vast majority of it ended up -- surprise! -- in the pockets of wealthy Wall Street investors or corporate CEOs. Rather than dole out raises or expand their businesses, which would have aided the workforce through increased competition for jobs, the vast majority of the tax savings has gone into stock buybacks, which dramatically increase share prices and thus benefit the affluent investor class.

"Since the tax cuts passed, companies have been using buybacks to return record amounts of cash to shareholders -- more than $700 billion in the first two quarters," Bloomberg's Smith reported. "That naturally raises the possibility that companies don't have good projects to invest in. If companies pass their tax windfall on to shareholders, those investors can choose to react by increasing consumption -- meaning more of society's resources go to the wealthy."

That's hardly news to Mark Price, a Pennsylvania-based labor economist who recently coauthored a report for the D.C.-based Economic Policy Institute called "The New Gilded Age," which found that the top 1 percent of earners in Pennsylvania make 20 times the average for the other 99 percent, the 14th worst wealth gap among the 50 states. Federal as well as state tax policies have played a big role -- although not exclusively -- in making this gap so much wider since the 1970s.

Price said it's increasingly obvious that the torrent of economic expansion -- "putting that fifth Starbucks on every corner," he joked -- promised by the GOP/Trump tax cut didn't happen, and isn't going to happen. "It's financed an expansion in CEO compensation but not financed additional investment -- that's why we're not seeing any wage growth," he said.

This is the outcome many of us warned about last fall when the tax-cut bill streaked through Capitol Hill. Nothing in the legislation would require corporations to funnel their added cash to workers and -- although a handful of mostly pro-Trump corporations issued press releases to hail small one-time raises, some of which had been planned before the bill even passed -- for the most part none of them have. It turns out that you can't easily legislate against greed, assuming you even want to

This week, the attitude of these so-called job creators upon whom Congress showers these tax cuts was summed up by a low-life corporation with the fitting name of Tronc, which last year rewarded its chief executive forced out by sexual-harassment allegations with a $15 million consulting gig so he could land on his feet; then, pleading poverty, Tronc obliterated 50 percent of the reporting staff of the New York Daily News, one of the great nameplates in American journalism. I couldn't agree more with Deadspin when it asked, "How Is This (Bleep) Legal?"

But tax cuts seem to be the only law our so-called lawmakers in Washington know how to pass. It turns out that widening America's already obscene wealth gap isn't the only ill wind blowing in the aftermath of the tax-cut fiasco. The federal budget deficit -- which Republicans once saw as a life-or-death matter when the president was named Barack Obama -- is soaring under GOP rule.

It now appears that the Trump tax cut will add $1 trillion to the national debt over the next decade. Not only will these missing dollars end up in some hedge-fund manager's bigger yacht, but Republicans are certain to use the rising federal deficit as an excuse to slash the safety net for the same middle-class workers who also didn't get a raise.

Of course, the GOPers who now control all branches of government could roll back some of the excesses of the tax cut -- that's what Ronald Reagan did a year after it was clear that his initial 1981 tax reductions went too far. Instead, top Republican lawmakers said this week they want a vote this fall on "Tax Reform 2.0" that would add hundreds of billions of dollars more to the deficit.

Please, God, no.

If tax cuts don't raise paychecks or the standard of living for everyday workers, what would? How about ending government's 35-year-long assault on labor unions and the right to collective bargaining, which history has shown to be the best method for ensuring a prosperous middle-class? Or maybe not appointing Supreme Court justices like John Roberts, Neil Gorsuch -- or, now, Brett Kavanaugh -- who rule consistently against workers and for the bosses? Or ... here's a crazy idea: raising the long-stagnant minimum wage, or start moving toward a real living wage of $15 an hour, which would make an enormous difference in the lives of folks like Garnett, the parking-lot attendant.

He told me that even a slight raise to $10 or $11 an hour would make a real difference in his life, that maybe he could help out his daughter who's attending college or even buy a car -- as he spoke over the din of the crowded city bus he was riding home to North Philly.

Believe it or not, there are actually things that Congress can do to ensure that working-class people get their raise, which don't involve throwing wads of cash at a CEO and hoping he won't blow it all on his fifth vacation home. Of course, that will probably require a brand-new Congress -- not the one we have now. If that doesn't happen, I have an idea for a good investment in 2019: any company that manufactures torches or pitchforks. Assuming you can find the spare cash.

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