Terry McLaughlin: Trump’s tax cuts and deregulation
On the campaign trail, and during the recent Presidential debate, former Vice President Joe Biden has repeatedly stated that only the wealthy have benefited from the Trump administration’s tax cuts and deregulation. But is that perception actually the reality? On September 28 the Federal Reserve published their Survey of Consumer Finances, and even I was surprised by the conclusions.
The Federal Reserve’s analysis revealed that “families at the top of the income and wealth distributions experienced very little, if any, growth” in net worth between 2016 and 2019 “after experiencing large gains between 2013 and 2016,” which was during the Obama/Biden Administration. “Families near the bottom of the income and wealth distributions generally continued to experience substantial gains.” Translation: During the first three years of the Trump/Pence Administration wealth inequality declined and the wealth gap narrowed.
According to the Federal Reserve documents, between 2016 and 2019, white, wealthy and college-educated households had relatively less income growth than other groups. The Fed noted that “more broadly, the income gaps between families with a college degree and those without one decreased.” Real median incomes grew 9% for Americans without a high school diploma and 6.3% for those with only a high-school diploma, while real median incomes declined 2.3% among those with a college degree.
Digging even further into the data reported by the Fed also reveals growing wealth among lower-income Americans. Net worth increased 32.5% among the lowest income quintile and 30.7% among the second lowest, while showing a modest decline for those in the highest group. Net worth also increased among blacks by 32.1% and Hispanics by 63.6%, compared to whites at only 4%.
Rising incomes also made home ownership more affordable. The report from the Federal Reserve showed that home ownership declined across the socioeconomic spectrum during the Obama/Biden Administration despite near-zero interest rates, but it ticked up 1.4 percentage points overall from 2016 to 2019, including among Hispanics (1.8 points) and blacks (2.3 points). The Fed report stated that “for families that own a home, the median net housing value (the value of a home minus home-secured debt) rose to about $120,000 from about $106,000 in 2016.”
The growth in business equity was also quite significant, especially among blacks (138%), Hispanics (63%) and Americans without a high-school diploma (104%). According to the Wall Street Journal on September 19, “the gig economy and online platforms like Etsy have made starting a business easier, but so have the Trump Administration’s deregulation and the 2017 tax reform.”
In addition to the Federal Reserve’s publication, the U.S. Census Bureau released data on September 15 revealing that the median household income in 2019 was $68,703, an increase of 6.8% from 2018. The official poverty rate in 2019 was 10.5%, a decrease of 1.3 percentage points from 11.8% in 2018. This was the fifth consecutive annual decline in the national poverty rate. Since 2014, the poverty rate has fallen from 14.8% to 10.5%. The 2019 poverty rate of 10.5% was the lowest rate observed since estimates were initially published for the year1959.
The percentage of people with health insurance coverage for all or part of 2019 was 92%, according to the 2020 Current Population Survey Annual Social and Economic Supplement (CPS ASEC). Private health insurance coverage was more prevalent than public coverage, covering 68% of the population at some point during the year. Employment-based insurance was the most common subtype, and some people may have had more than one type of coverage during the calendar year.
These findings are contained in: Income and Poverty in the United States: 2019 and Health Insurance Coverage in the United States: 2019
According to the Census Bureau’s report, during the first three years of the Trump Administration blacks saw their incomes rise by $3,389, Hispanics saw their incomes rise by $5,322, and women saw their incomes rise by $3,029.
Every demographic saw a larger income gain in three years under the Trump Administration than in the eight years of the Obama/Biden Administration. For more good news, the report also found that poverty rates for every ethnic group fell to near or all-time record lows, which coincided with record low unemployment rates for all races.
In President Trump’s first three years in office median incomes for all households rose more than $6,000. In the previous sixteen years, under both the Bush and Obama/Biden Administrations, incomes rose less than $3,000. There was twice as much gain under the Trump Administration’s policies achieved in one-fifth of the time.
The obvious policy lesson is that the current administration’s economic policies worked better for Americans across the income and ethnic spectrum than even the most ardent supporters of tax cuts and deregulation could have predicted. Candidate Joe Biden’s economic strategy is to reverse these same policies. He has straight-forwardly told the American people that he will immediately repeal the 2017 tax cuts; increase regulation on nearly every industry, and declare war on American energy. In short, Joe Biden wants to return to the pre-2016 economy he presided over with President Obama, or worse – if he chooses to “shut down the country” in January, as he has indicated a willingness to do. Donald Trump wants to rebuild the economy in the aftermath of the Covid-19 pandemic using the strategies he used in 2017 and 2018 – strategies which created the fastest economic progress in at least thirty years.
Americans have a clear choice of two different paths forward.
Terry McLaughlin, who lives in Grass Valley, writes a twice monthly column for The Union. Write to her at email@example.com.
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