Capital & Main is an award-winning publication that reports from California on economic, political, and social issues.
The economy is growing. The stock market is soaring. The unemployment rate has dropped to its lowest point since 1969. And President Trump consistently scores higher approval on the economy than almost any other issue.
As Trump asked a crowd of supporters this summer, “How the hell do you lose this election, right?”
But many economists say Trump’s administration can’t claim responsibility for these long-running trends, and the president’s policies—from tax cuts and tariffs to deregulation and weakening of the social safety net—have contributed to a less laudable development: rising inequality.
The impacts of these policies are predicted to intensify in the years to come. Economists told Capital & Main that halfway through Trump’s presidency, in spite of a booming economy, low- and middle-income Americans find themselves in more dire straits when it comes to:
- Student loan debt
- Social safety net assistance
- Employee rights
- Benefits from taxes and trade
Americans trying to work their way up from the bottom are feeling the brunt of all this. Government assistance programs “essentially give Americans bootstraps” by reducing poverty and increasing economic mobility, said Indivar Dutta-Gupta, co-executive director of Georgetown University’s Center on Poverty and Inequality. But, he noted, Trump’s administration has “gone after the bootstraps, and that is a systematic pattern.”
Perhaps most ominously, an administration known for its ambivalent relationship with facts is also seeking to change how the federal government measures poverty itself, which could reduce the number of people who qualify for basic assistance programs, including Medicaid, children’s healthcare, and food aid.
Although Trump entered office with promises of supporting workers, his administration has instead “sold out the American middle class” in a “bait-and-switch” that has benefitted the nation’s wealthiest and left the rest of us behind, said Heidi Shierholz, a senior economist and policy director with the liberal Economic Policy Institute think tank.
Trends under Trump
Trump recently claimed that “inequality is down.” But the very next day, U.S. Census Bureau data confirmed that income inequality has hit its highest level since the federal government started tracking it five decades ago. The richest one percent of Americans now rake in one-third of the country’s net worth, while the bottom half of the population scrapes by with only 1.2 percent.
“The economy is growing, growing, growing,” said Shierholz. “But the fruits of that growth are not broadly shared—they’re captured by the people at the top.”
Today, wealth concentration has returned to levels last seen during the Roaring Twenties. Notably, the wealth gap between white and black Americans has more than tripled over the past 50 years, leaving the median white family with almost 10 times as much wealth as the median black family.
But the country can’t blame Trump or give him credit for the decades-long trends that have led to the growth of the economy and of inequality, said Chuck Collins, the program director for the progressive Institute for Policy Studies’ Program on Inequality and the Common Good.
Collins likens the economy to “a giant ship moving through the ocean” with such momentum that “there’s only so much you can do to change its direction or slow it in the short term.” Nonetheless, under the Trump administration, there have been “so many lost opportunities to address the underlying drivers of inequality.”
On the contrary, Trump has routinely used his executive authority and regulatory reforms to push through “aggressively regressive redistributive policies” that have “overwhelmingly benefited the wealthy and worsened inequality,” as Philip Alston, the United Nations special rapporteur who acts as a watchdog on extreme poverty, recently reported.
Big-ticket policies that rely on trickle-down economics
Trump’s Tax Cuts and Jobs Act—which gave nominal tax breaks to most Americans, while massively benefiting the wealthy—is the most visible of his administration’s inequality-boosting measures.
Republicans argue that the $1.5 trillion tax break has led to economic growth and upward mobility for middle- and low-income workers.
Joel Griffith, a research fellow with the conservative Heritage Foundation’s Institute for Economic Policy Studies, told Capital & Main that the tax cuts for corporations “spur investment and allow productivity to increase, which helps all of us.”
A lesser-known part of the tax law, the so-called opportunity zones meant to “spur economic development and job creation in distressed communities,” also appears to be lining the pockets of wealthy investors by allowing them to defer—or never even pay—capital gains taxes on their investments, while doing little for local residents.
Griffith, who is otherwise supportive of Trump’s tax law, acknowledged that opportunity zones are concerning. While investors gain by “putting up a new highrise or luxury structure,” the targeted beneficiaries, in many cases, won’t qualify for the jobs created, much less be able to afford the new housing or office spaces.
Meanwhile, Trump’s trade policies, most prominently his mounting tariffs against China, are creating uncertainty that could sour the economy. Farmers and consumers are already paying the price. And the manufacturing sector, whose revitalization Trump campaigned on in 2016, cites his trade wars as a top challenge. Federal Reserve chair Jerome Powell recently said that Trump’s trade policies “seem to be having a significant effect on financial market conditions and the economy.” As a result, for the first time since the Great Recession, the Fed has cut interest rates three times. With a potential recession looming, the levels of inequality in the United States could make its onset more likely and its impacts worse.
Beyond promoting big-ticket tax and trade policies, Trump’s administration has taken executive action and made rule and regulatory changes that have left many Americans in precarious financial straits. For example, even as the economy booms, the number of Americans without health insurance is rising; it’s a trend that Georgetown’s Dutta-Gupta said is “pretty hard to explain . . . unless you understand the extraordinary attempts that the administration took to sabotage the Affordable Care Act.”
Trump had promised in his 2016 run to dismantle his predecessor Barack Obama’s signature health care policy. Although it hasn’t been repealed by Congress, the president has used his executive authority to severely dent it. Now, for the first time in a decade, the uninsured rate is rising year upon year, and healthcare costs remain the biggest financial strain for most families.
As if this burden weren’t enough, at least 45 million Americans are also saddled with a total of $1.6 trillion in student loan debt—an historic high. After five years of repayment, half of borrowers haven’t paid even $1 toward their debt’s principal. Two in 10 borrowers are behind on their payments, and 40 percent of student loan borrowers could default by 2023. But Trump’s Department of Education has not only failed to tackle the issue; it’s largely made the problems worse. In fact, earlier this year, the department blocked efforts to improve the loan forgiveness program for public service workers, which Trump has now proposed eliminating altogether.
When it comes to housing, Trump has called for the deepest cuts in aid since the early 1980s, and his Department of Housing and Urban Development has consistently proposed changes that would dismantle fair housing protections and could leave vulnerable people out on the street.
Collins also pointed to other “troubling signs” that reveal inequality’s impacts on Americans’ everyday lives. While real wages are up for those at the top, wages have stagnated or fallen for those at the middle and bottom. The longest ever period has passed without a federal minimum wage increase. Home ownership, the main source of wealth and savings for middle-income families, is down. One in five households have zero or negative net worth to fall back on and 40 percent of Americans would struggle to pay even a $400 unexpected expense.
“Death by a thousand paper cuts”
Perhaps no policies better showcase the administration’s attacks on working people than its piece-by-piece dismantling of employee rights through rulemaking and decisions by the Department of Labor and the National Labor Relations Board (NLRB), which have weakened unions and stripped away worker protections that could otherwise help tackle inequality.
“President Trump as a campaigner talked about how we were going to do things that help workers get ahead,” said Shierholz. But in practice, the administration has prioritized the “interests of corporate executives and shareholders, over those of workers.”
The NLRB is meant to be an independent federal agency that protects workers’ rights to “join together, with or without a union, to improve their wages and working conditions.” But under Trump it has instead allowed companies to stop their employees from organizing or picketing on workplace properties, to force their employees into arbitration or disallow class or collective claims, and to have more say in bargaining unit determinations. Many unions are so concerned with the precedents set by Trump-era NLRB rulings that, to avoid inviting further damage, they have stopped filing unfair labor practice charges, a tool typically used to hold companies accountable for worker mistreatment or failure to engage in good-faith bargaining.
Taken together, these regulatory changes have a big effect on workers. “This is the sort of ‘death by a thousand paper cuts’ thing,” Shierholz said.
And for the most marginalized Americans, many of whom can’t work or have low-paying jobs, the cuts have been deepest.
In part, Trump’s administration has sought to make participation in public assistance programs more onerous through stringent work requirements that Georgetown’s Center on Poverty and Inequality argues “are costly to administer, counterproductive, and inequitable, as they disproportionately affect people and groups who already face systemic oppression and other barriers.”
A second term for Trump would likely mean a doubling down on his inequality-exacerbating tax and regulatory agenda.
“There will be more tax cuts and further inequality,” said Steven Wamhoff, the director of federal tax policy at the Institute on Taxation and Economic Policy. Republicans have already proposed legislation to make Trump’s 2017 tax cuts permanent, because many provisions will otherwise expire at the end of 2025. While the bill would protect cuts for low- and middle-income households, it would mainly benefit the richest fifth of Americans.
The Heritage Foundation’s Griffith suggests that Trump’s reelection would also allow for a continuation of the “regulatory reform that has been going on behind the scenes.” Because it can take years for such changes to come into effect following administrative processes and legal challenges, the results of this administration’s proposals will play out into the next administration—and possibly beyond.
If the courts affirm these pending actions, Dutta-Gupta worries there may be “growing harms over time.” Overall, the Trump administration’s use of executive action and piecemeal regulatory reforms has shown that “there is much damage that an administration can inflict with or without cooperation from Congress.”
Many of the economists consulted by Capital & Main speculate that if economic inequality continues to expand unabated, the United States is likely to see further political and cultural polarization, the further crippling of upward mobility, and a more volatile economy. But the action needed to tackle these disparities is unlikely to come under the Trump administration.
“The economy is on extreme inequality auto-pilot, with the rules governing the economy projected to worsen inequality,” Collins said. “So if Trump does nothing, inequalities will intensify.”