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How Trump Has Betrayed the Working Class

The consequences of Trump’s and the Republicans’ excessive corporate giveaways and their failure to improve the lives of ordinary working Americans are becoming clearer by the day.

The only tricks left to Trump and the Republicans are stoking social and racial resentments and claiming to be foes of the establishment. (Photo: Alex Wong/Getty Images)

The only tricks left to Trump and the Republicans are stoking social and racial resentments and claiming to be foes of the establishment. (Photo: Alex Wong/Getty Images)

For a century the GOP has been bankrolled by big business and Wall Street. Trump wants to keep the money rolling in. His signature tax cut, two years old last Sunday, has helped U.S. corporations score record profits and the stock market reach all-time highs. To spur even more corporate generosity for the 2020 election, Trump is suggesting more giveaways. Chief of staff Mick Mulvaney recently told an assemblage of CEOs that Trump wants to “go beyond” his 2017 tax cut.

Trump also wants to expand his working-class base. In rallies and countless tweets he claims to be restoring the American working class by holding back immigration and trade. Incumbent Republicans and GOP candidates are mimicking Trump’s economic nationalism. As Trump consigliore Stephen Bannon boasted recently, “we’ve turned the Republican party into a working-class party.”

Keeping the GOP the Party of Big Money while making it over into the Party of the Working Class is a tricky maneuver, especially at a time when capital and labor are engaged in the most intense economic contest in more than a century because so much wealth and power are going to the top.

Armed with deductions and loopholes, America’s largest companies paid an average federal tax rate of only 11.3 percent on their profits last year, roughly half the official rate under the new tax law—the lowest effective corporate tax rate in more than eighty years.

Yet almost nothing has trickled down to ordinary workers. Corporations have used most of their tax savings to buy back their shares, giving the stock market a sugar high. The typical American household remains poorer today than it was before the financial crisis began in 2007.

Trump probably figures he can cover up this massive redistribution from the working class to the corporate elite by pushing the same economic nationalism, tinged with xenophobia and racism, he used in 2016. 

Trump’s giant tax cut has also caused the federal budget deficit to balloon. Even as pretax corporate profits have reached record highs, corporate tax revenues have dropped about a third under projected levels. This requires more federal dollars for interest on the debt, leaving fewer for public services workers need.

The Trump administration has already announced a $4.5 billion cut in food stamp benefits that would affect an estimated 10,000 families, many at the lower end of the working class. The administration is also proposing to reduce Social Security disability benefits, a potential blow to hundreds of thousands of workers.

The tax cut has also shifted more of the total tax burden to workers. Payroll taxes made up 7.8 percent of national income last year while corporate taxes made up just 0.9 percent, the biggest gap in nearly two decades. All told, taxes on workers were 35 percent of federal tax revenue in 2018; taxes on corporations, only 9 percent.

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Trump probably figures he can cover up this massive redistribution from the working class to the corporate elite by pushing the same economic nationalism, tinged with xenophobia and racism, he used in 2016. As Steve Bannon has noted, the formula seems to have worked for Britain’s Conservative Party.  

But it will be difficult this time around because Trump’s economic nationalism has hurt American workers, particularly in states that were critical to Trump’s 2016 win.

Manufacturing has suffered as tariffs raised prices for imported parts and materials. Hiring has slowed sharply in Pennsylvania, Michigan, and other states Trump won, and in states like Minnesota that he narrowly lost.

The trade wars have also harmed rural America, which also went for Trump, by reducing demand for American farm produce. Last year China bought around $8.6 billion of farm goods, down from $20 billion in 2016. (A new tentative trade deal calls for substantially more Chinese purchases.)

Meanwhile, health care costs continue to soar, college is even less affordable, and average life expectancy is dropping due to a rise in deaths from suicide and opioid drugs like fentanyl. Polls show most Americans remain dissatisfied with the country’s direction.

The consequences of Trump’s and the Republicans’ excessive corporate giveaways and their failure to improve the lives of ordinary working Americans are becoming clearer by the day.

The only tricks left to Trump and the Republicans are stoking social and racial resentments and claiming to be foes of the establishment. But bigotry alone won’t win elections, and the detritus of the tax cut makes it difficult for Trump and the GOP to portray themselves as anti-establishment.

This has created a giant political void, and an opportunity. Democrats have an historic chance to do what they should have done years ago: Create a multi-racial coalition of the working class, middle class, and poor, dedicated to reclaiming the economy for the vast majority and making democracy work for all.

Robert Reich

Robert Reich

Robert Reich, is the Chancellor’s Professor of Public Policy at the University of California, Berkeley, and a senior fellow at the Blum Center for Developing Economies. He served as secretary of labor in the Clinton administration, for which Time magazine named him one of the 10 most effective cabinet secretaries of the the twentieth century. The author of many books, including the best-sellers Aftershock, The Work of Nations, Beyond Outrage and, Saving Capitalism. He is also a founding editor of The American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." Reich's newest book is "The Common Good." He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

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