If we are to believe President Trump, his presidency has resulted in a smashing economic turnaround for the nation. “There has never been a better time to start living the American dream,” the president said in his State of the Union address last week before echoing calls from Republicans to slash social safety nets.
Wages are not rising quickly with the economic tide, but the cost of living is.
Trump’s speech prompted a debate among economists over whether lower unemployment rates and stronger markets are truly the result of Trump’s pro-business agenda and GOP tax cuts, or the long-term benefits of Obama-era policies. The president was uncharacteristically silent about his ability to influence markets as the US stock market took a steep nosedive on Monday, according to reports.
Put the partisan conversation aside, however, and hard data reveals that a growing economy has not made “living the American dream” easier for everyone.
For many working-class families — including the “forgotten men and women” Trump has claimed to champion — current indicators of economic growth have not translated into shared prosperity, according to a new report from Prosperity Now, a group that tracks economic prosperity among lower-income Americans and communities of color.
In short, wages are not rising quickly with the economic tide, but the cost of living is.
Unemployment rates have fallen below pre-recession levels in many parts of the country, but nearly one in four jobs pays below the federal poverty level, according to the report. The rate of low-wage employment has fallen only 2 percent since peaking at 25.6 percent in 2013.
Despite the apparent economic upturn, nearly 37 percent of households in the United States are considered “liquid asset poor.”
Increases in average annual pay are not keeping up with the price of housing, which has become increasingly unaffordable for the average family, particularly in urban areas. Since last year, the average price of housing has risen 4.1 percent (about $8,000) while the median household income has increased by only 2 percent, according to the report.
To make ends meet, workers turn to temporary employment and jobs in the gig economy that provide an unstable income without benefits like retirement savings and health insurance, making it difficult to manage household finances over the long term. One in five working households reports moderate to significant income fluctuations from month to month, and 40 percent of those households report difficulty paying bills as a result, according to the report.
This helps to explain why, despite the apparent economic upturn, nearly 37 percent of households in the United States are considered “liquid asset poor,” meaning that they do not have enough savings to support their families at the federal poverty level for three months if working members lost their jobs. Poverty rates are even higher among households in which at least one adult member lives with a disability, and 50 percent of these families are considered liquid asset poor.
Economic growth is also not the same as economic equality. As Trump boasted in his address, unemployment among Black Americans has fallen to historically low levels. However, the national Black unemployment rate (7.7 percent) was more than double the unemployment among whites (3.5 percent) in January, according to federal data. Latinos also face a higher unemployment rate than whites, at 5 percent. Black unemployment is three times higher than white unemployment in at least seven states, according to the Prosperity Now report.
Solana Rice, a co-author of the report, suggested that racial inequality would not be solved with gains in the stock market.
“The racial wealth divide is definitely a structural phenomenon that is perpetuated by many of our state and federal policies … and fueled in large part by a gap in home ownership and a gap in educational attainment,” Rice told Truthout in an interview.
The racial gap in education attainment is also structural, Rice explains. Students of color tend to enter college with fewer assets that make it easier to achieve academically. They also graduate with more debt than their white counterparts. Moreover, graduates of color face discrimination upon entering the workforce, and white families have more wealth than Black and Latino families, even when breadwinners have similar educational backgrounds.
Investing in education continues to be a huge burden for working families, and one in five borrowers in the US has student loan debt, according to Prosperity Now. With the median amount borrowed at $17,711, it’s clear that saving for a good education is no easy task for the average family supported by low-wage jobs.
In his speech, Trump called on lawmakers to “lift our citizens from welfare to work, from dependence to independence, and from poverty to prosperity.” In this narrative, it is dependence on social programs that keeps people poor. In the Republican dream world, squeezing people out of programs like Medicaid provides the motivation they need to get on their feet.
With basically a stroke of the pen, we have been able to subsidize the wealth of the wealthy, but the opposite could be true, if we wanted it to be.
However, Rice said it’s the other way around. Unemployment levels are dipping, but without improved wages and benefits from employers, many people must still rely on the safety net to meet basic needs and build a more prosperous future.
“We need to recognize that these actions are fueled by poor choices, and they are not the poor choices of low-income people as they would like to believe,” Rice said “These are poor choices on the behalf of policy makers who have a misunderstanding of what it really means to be low income in this country.”
Rice said the most egregious example of poor policymaking is the Republican tax overhaul that Trump recently signed into law. The new tax code slashes corporate taxes while expanding tax credits for people who are more likely to be higher-income, such as homeowners and parents who wish to send their children to private schools. The GOP also repealed the Affordable Care Act’s individual mandate designed to lower insurance costs for people who work jobs without health benefits.
As a result, the wealthiest people in the country are expected to be the primary beneficiaries of the tax cuts, while families earning less than $25,000 can expect about $60 in savings, according to Prosperity Now and the Tax Policy Center.
In order to address the US’s enormous wealth gap, Rice said that we need a fundamentally different kind of “tax reform.”
“With basically a stroke of the pen, we have been able to subsidize the wealth of the wealthy, but the opposite could be true, if we wanted it to be,” Rice said. “The tax code is the major way that we redistribute wealth in this country.”