Dems flip economy script on GOP amid stagnant wages

Democrats are flipping the script on Republicans, blaming the Trump administration’s policies for lackluster wage growth as they seek to blunt any political benefits from the growing economy for the GOP.

It’s a significant change from just two years ago, when Democrats broadly hoped that falling unemployment numbers would help Hillary Clinton keep the White House in Democratic hands.

At the time, Donald Trump and Republicans used stagnant wages to bolster their argument that growth under President Obama was sluggish and that the GOP should be put back in the White House.

Now Democrats are making a similar argument ahead of this year’s midterm elections.

{mosads}“July’s jobs report shows that the wealthiest 1 percent and big corporations continue to hoard the benefits of the GOP Tax Scam for the rich, while American workers are denied the bigger paychecks they deserve,” House Minority Leader Nancy Pelosi (D-Calif.) said in a Friday statement after the Labor Department reported the economy added 157,000 jobs in July.

Sen. Bernie Sanders (I-Vt.) tweeted a similar message on Monday.

“Despite Trump’s tax giveaway to the wealthy and large corporations, real wages have actually gone down, not up, since June 2017,” he wrote. “The economy may be the best in history for billionaires like Jeff Bezos, but it is not ‘booming’ for the average worker.” 

Taking into account increasing prices, the average hourly wage didn’t budge a cent in the year leading up to June, according to the Bureau of Labor Statistics, even as the one-two punch of tax cuts and spending have pumped up the economy and hiring.

But the partisan rhetoric over jobs and wages has changed since the 2016 election season, even though the economic trajectory remains similar.

“In some ways you see the script between the parties is flipped, where the economy is shaping up to be like 2016 with strong topline numbers and slow real wage growths, and you have the parties trying to reverse their positions in terms of what they’re selling, on whether it’s going well or going poorly,” said Michael Madowitz, an economist at the Center for American Progress, a liberal think tank.

During his campaign, Trump played down the strong job growth seen under the Obama administration, saying that the true unemployment rate was far higher than statistics showed. He also took aim at stagnant wages.

“Our manufacturing base has crumbled, communities have been hollowed out, wages have declined, and households are making less today than they were in the year 2000,” Trump said in an economic speech two months ahead of his election.

In the same speech, he predicted that a Trump presidency would lead annual wages to rise over $30 billion in seven years.

While Obama touted the creation of “more than 14 million new jobs” in his final State of the Union address in 2016, House Speaker Paul Ryan (R-Wis.) tweeted a rejoinder that “Our economy is weak. Wages are stagnant.”

The unemployment rate at the time had dropped to 4.9 percent, from a peak of 10 percent following the financial crisis.

That same month, Ryan laid out a Republican agenda centered around tax reform.

“We owe it to the country to offer a bold, pro-growth agenda. And that is what we are going to do. The first item on that agenda is creating jobs and raising wages,” he said.

Eight months after the promised tax reform took effect, however, Republicans are shying away from discussions about stagnant wages, while Democrats dismiss the falling unemployment rate and surging economic growth. 

The problem with flat wages is nothing new. 

A 2015 report from the Economic Policy Institute found that the typical worker’s hourly pay only rose 9 percent between 1973 and 2013, a tenth the rate it grew from 1948 to 1973.

According to data from the Bureau of Labor Statistics, real hourly wages between 2001 and 2013 were all but identical, despite some fluctuations in the intervening years. Following the Great Recession in 2008, wages dipped almost three percentage points before finally recovering to pre-recession levels in 2015.

By the end of Obama’s presidency, wages were climbing at as fast a rate as they had since the Sept. 11 attacks in 2001, but they were still anemic. 

One problem, says Madowitz, is that economists can’t quite figure out why wages aren’t going up. In theory, as more jobs open up in the economy and the pool of workers waiting on the sidelines diminishes, employers should raise wages to attract workers. 

“We knew wages would be slow in the first couple of years of the recovery, because we had a lot of unemployment to work off, but the labor market has tightened considerably since then,” Madowitz said. 

One possible reason for the persistent lag in wages is a mismatch between the skills employers need and the skills workers have.

A poll of small businesses released Tuesday by Wells Fargo and Gallup found that, despite record levels of optimism, the greatest challenge small-business owners said they face was hiring.

Democrats are campaigning on policies that would raise the minimum wage, strengthen unions and increase taxes on the wealthy to pay for things like infrastructure and health care. 

Republicans hope that the low unemployment rate and surging economic growth will drive their economic message forward in November, or that wages will finally start ticking up ahead of Election Day.

“The best thing they can do is stay out of their own way and let the good economic news lead the coverage, and help push it,” said Doug Heye, the former communications director of the Republican National Committee.

In Heye’s view, the bigger threat to the GOP is President Trump’s penchant for pushing scandal into the headlines instead of focusing on tax cuts and the economy.

“The challenge so many Republican candidates face is having good economic news break through all the cacophony coming from the White House. Whether it’s the first Friday of the month, or the recent [gross domestic product] GDP numbers, the president’s tweets, or comments by his legal team, ensure that that good news is not the focus,” he said.

One bright point for Republicans could be that, despite stagnant wages, Americans have a brighter view of the economy today than they did two years ago. A Gallup poll found that 55 percent of Americans rated the economy as good or excellent in July, more than double the number that felt that way in 2016.

But when it comes to wages, economists from both sides of the spectrum are asking if the economy has fundamentally shifted to keep growth stagnant, whether because of technology, automation, demographics, globalization or some combination.

“I think the economics profession as a whole is asking this question, and looking at deeper structural explanations as to why wages aren’t going up,” Madowitz said.