Who really benefits from a strong US economy?

Experts say that little of the country’s economic boom is reaching poor and middle-class households.

Apple Customers
Companies like Apple have been repatriating cash to the US under the new tax laws [Mark Lennihan/AP Photo]

President Donald Trump often takes credit for the strong national economy. On his watch, wages are up, unemployment is down, and the poverty rate has continued a four-year decline.

Last summer, the Trump administration even declared the country’s war on poverty “largely over and a success”.

Yet, experts say that little of the country’s economic boom is reaching poor and middle-class households. On top of that, the Trump administration has pursued a long-standing Republican economic agenda of tax cuts, reduced social spending, and deregulation, which benefits the wealthy at the expense of the middle class and poor. 

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“When we look under the hood, we see that the Trump economy is one in which gains haven’t been equally shared – not even close – across the income spectrum,” said Rachel West, director of poverty research at the Center for American Progress, a progressive think-tank.

“As a result, there are many, many families today … who are sort of squeezed between stagnant wages that really haven’t increased appreciably in decades and rising costs,” West said.

The diverging fortunes of wealthy Americans and the rest of the country have been accelerated by Trump administration initiatives such as last year’s tax overhaul, West said.

The Tax Cuts and Jobs Act of 2017, one of the biggest changes to the tax code in US history, contained numerous measures benefiting large corporations and the wealthy.

According to the Institute for Policy Studies, a progressive think-tank, 53 percent of the law’s tax benefits will accrue to the wealthiest five percent of taxpayers, while the bottom 60 percent will receive just 13 percent of benefits.

Among the measures benefiting the wealthy are a reduction in marginal tax rates and easing of the estate tax, which primarily affects large net worth individuals.

Some industries gained more than others. For example, the law increases the amount that real estate developers can deduct from their taxes by claiming that their property depreciated due to wear and tear.

This massive giveaway to the wealthiest taxpayers is projected to increase the national debt by nearly $2 trillion over the next decade, according to the Congressional Budget Office. Growing deficits will provide Republicans with a pretext for slashing public programmes on which lower and middle class Americans rely, said Josh Hoxie, a researcher at the Institute for Policy Studies. 


“We are, by not taxing [the rich], bankrupting the public sector,” Hoxie said. “The most direct impact of this comes from people like Senate Majority Leader Mitch McConnell, who said that we have to blame our budget deficit on Medicare, Medicaid, and Social Security and thus need to look at cutting those programs.”

“I’d say that is a fairly direct and imminent threat to poor and middle class families,” Hoxie said.

As an example of how Trump and his Republican party seesaw between tax cuts for the wealthy and attacks on government programmes that help the poor, Hoxie pointed to the debate earlier this year over the Children’s Health Insurance Program, known as CHIP. The federal programme provides health insurance to millions of children from low-income families. Last spring, the Trump administration called on Congress to cut $7bn from CHIP’s budget, sparking a legislative fight between Democrats and Republicans.

Around the same time, the technology company Apple took advantage of the new tax law to repatriate hundreds of billions of dollars it had held offshore, saving approximately $40bn of the more than $78bn that it would have paid under the former tax code.

“With one hand, they’re saying, ‘we can’t afford to provide health insurance to 9 million low-income children’,” Hoxie said. “With the other hand, they’re doling out tens of billions of dollars of tax cuts to one of the most profitable corporations in the history of money.”

Social spending cuts

The Trump administration and Congressional Republicans have sought to roll back federal spending on welfare and poverty reduction programmes, including the Supplemental Nutrition Assistance Program, or SNAP. 


SNAP, a 2008 rebranding of the Food Stamp Program, is the government’s premier anti-hunger initiative, with a history dating to the 1930s. At the cost of about $70bn in 2017, SNAP helps one in eight Americans meet their nutritional needs. Two thirds of SNAP aid goes to families with children.

The Trump administration has proposed moving SNAP from the Department of Agriculture to the Department of Health and Human Services, along with other federal programmes that provide aid to poorer Americans. 

Conservative advocates argue that consolidating programmes within a single agency will allow the federal government to do a better job of tracking beneficiaries and enforcing restrictions like work requirements.

In addition, Congressional Republicans have pushed a Farm Bill, which funds SNAP, that would make it significantly harder for low-income Americans to enroll or remain in the programme, in part by expanding work requirements.

According to an analysis from the Center for Budget and Policy Priorities, or CBPP, the bill would also require states to expand their bureaucracies to track SNAP recipients, enforce restrictions on benefits, and report data to the federal government.

The net effect of these changes, according to the CBPP, would be to “take away SNAP benefits from recipients across the country who need them while failing to achieve the proponents’ stated goals of improving employment outcomes.”

Partisan disagreements over these proposed changes to SNAP have stalled the 2018 Farm Bill. Republicans plan to bring the bill to a vote after Tuesday’s midterm elections.


One of Trump’s first actions as president was to sign an executive order requiring federal agencies to repeal two existing regulations for every new regulation. The president often brags about slashing Washington, DC’s “red tape” on behalf of business, a perennial Republican goal. 


Trump’s handling of the Consumer Financial Protection Bureau, or CFPB, shows what this looks like in practice, as well as the potential effects on lower-income Americans.

The CFPB was formed under the Obama administration in response to the 2008 financial crisis and tasked with protecting US citizens from abusive financial practices such as predatory lending. Under Obama, the CFPB investigated businesses like the payday loan industry, which provides loans primarily to low-income workers at very high interest rates.

President Trump tapped Republican Mick Mulvaney to serve as acting director of the CFPB. Mulvaney had previously sponsored legislation as a US representative that would have abolished the CFPB.

As acting director, Mulvaney has slowed the CFPB’s activities to a crawl, prompting some staffers to leave. One former CFPB employee, who left the bureau during the Obama administration and requested not to be identified, speculated that the Trump administration has opted to cripple the bureau rather than abolish it outright in an effort to limit the CFPB’s long-term regulatory scope.

The CFPB is one of the few federal agencies regulating nonbank financial businesses, which provide financial services without a full banking license and are subject to less oversight than banks. At the same time, financial services such as mortgages have increasingly moved to the nonbank sector – last year, nonbank financial companies issued more than half of all mortgages. Some analysts worry that these potentially under-regulated loans could recreate the conditions that produced the 2008 financial crisis. 

Source: Al Jazeera