In his State of the Union address five years ago, President Barack Obama talked at length about what he called “middle-class economics.” After years of economic stagnation, he promised that the only thing needed to revive the economy was more middle-class benefits. The middle class has made substantial gains since then, but only because President Donald Trump ignored everything Obama said.
In Obama’s address, he described “middle-class economics” as “helping folks afford childcare, college, health care, a home, retirement.” In other words, still more federal middle-class entitlements and new mandates on employers (higher minimum wage, paid family leave, etc.).
Instead, Trump delivered tax cuts derided by the left as a giveaway to the rich, and deregulated measures that Democrats had claimed were pro-growth.
And when Trump addressed Congress last week, he rattled off a long list of economic gains that resulted from his break from Obama’s “middle-class economics.” It turns out that cutting taxes and regulations, not more government spending, is what the middle class needs.
Included in Trump’s list was the fact that the wealth of the bottom half of American households increased three times as fast as the “1%.”
“That’s true, according to Federal Reserve data,” said Reuters. “On average, Americans have seen a 17% jump in household wealth since Trump’s election, while wealth at the bottom half has increased 54%.” The top 1% has seen a gain of 13%.
Democrats have been complaining about increases in income inequality for years. How do they explain the fact that it’s declining under Trump?
The mainstream press found itself at pains to discredit other claims cited by Trump, and often resorted to picking nits in frustration. For example, the media labeled Trump’s claim that there’d been 7 million jobs created since he took office as “not true,” because the correct number was 6.6 million. Never mind that consensus forecast for job growth when Trump took office was 2 million.
Friday offered more good news for the middle class. The Bureau of Labor Statistics reported that the economy created 225,000 jobs, far more than expected. A big winner: construction jobs, which accounted for 44,000.
Meanwhile, average hourly earnings rose 3.1% over a year ago, which also beat expectations, marking the 18th consecutive month of gains in excess of 3%. Under Obama’s “middle-class economics,” wage growth was mired at around 2%. (See chart below.)
The report also showed the labor-force participation rate climbing, as the economy continued to pull workers off the sidelines into the job market. In January alone, 183,000 reentered the workforce.
As we’ve said in this space before, it’s important to remember that none of these gains was foreordained. In fact, when Trump took office, the consensus forecast for growth was bleak. The Congressional Budget Office projected that unemployment, which wasn’t ever supposed to fall below 4.4%, was on its way up.
And while Trump has yet to hit 3% GDP growth, the results have been far above what the CBO and other conventional economists had predicted.
In his speech, Trump said, “If we hadn’t reversed the failed economic policies of the previous administration, the world would not now be witnessing this great economic success.”
He’s right. Which is probably why House Speaker Nancy Pelosi felt the need to tear up her copy of Trump’s speech when he finished.
— Written by John Merline
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