Banks Post Record-Breaking Profits, Wages Way Down
Big banks are celebrating a blockbuster second quarter, with profits soaring to a record $60.2 billion. That’s an increase of more than 25 percent compared to the second quarter last year, according to Reuters.
With Wall Street doing so well, how are workers on Main Street faring? After all, Trump and Republicans claimed wages would start soaring with the new tax bill.
Bloomberg reports that before the tax bill passed, White House Council of Economic Advisers Chairman Kevin Hassett said he expected reducing corporate taxes would spark “an immediate jump in wage growth.”
Unlike GOP promises, real wages for workers are down.
“Inflation-adjusted hourly wages dropped 0.2 percent in July from a year earlier, their worst reading since 2012, according to the Labor Department,” says Bloomberg.
Big banks are making out like bandits, while workers aren’t seeing the benefits. Sadly, this is exactly the result economists predicted.
“It was our expectation that the major elements of the tax plan likely wouldn’t trickle down into stronger wages for the average worker,” Michael Gapen, chief U.S. economist at Barclays, told Bloomberg. “It was more likely to go as returns to shareholders.”
Wealthy corporations aren’t spending their massive tax breaks on wage increases, they’re putting profits into stock buyback schemes, benefitting shareholders.
Stock buybacks are when a company uses their profits to purchase shares of their own stock. Doing so reduces the number of stocks to purchase, thus increasing the value of the shares held by stockholders, explains CNN. Rich corporations are on pace to buy back a record $1 trillion worth of shares this year.
In addition to making Wall Street investors richer, “the explosion of buybacks will help enrich corporate executives, whose compensation is often linked to their share price,” says CNN.
Some beneficiaries of the tax scam are writing massive checks to thank the Republican Party that helped them get richer in the first place.
Casino magnate and GOP mega-donor Shelden Aldeson saw a benefit of almost $700 million from the tax scam. After the bill was signed into law, he donated $30 million to a super PAC affiliated with Republican House Speaker Paul Ryan, with the aim of helping the GOP maintain control of the House of Representatives.
Republicans were initially excited to use the tax scam as a positive campaigning point for the 2018 midterms. But as special elections in Pennsylvania and Ohio showed, Republicans are quickly abandoning using the bill as a talking point.
It is becoming clear that a message of falling wages combined with record-setting big bank profits does not resonate with too many people.
Published with permission of The American Independent. Attribution: Dan Desai Martin.