Former Senior Vice President, Economic Policy Division, and Former Chief Economist
March 15, 2018
“Let them eat cake,” Marie Antoinette is quoted as quipping regarding France’s starving and soon-to-be rampaging masses. Perhaps Nancy Pelosi, the House Democratic leader, had something similar in mind when she referenced “crumbs” in the context of the $1,000 bonuses many Americans are receiving due to the recently enacted tax reform bill. As it happens, Nancy Pelosi and her husband are really, really rich, and so to them, $1,000 probably does seem like crumbs, but as Vice President Pence retorted, “If I had another $1,000 in my pocket at the end of the year, I have a term for that: Christmas. … Or maybe a little something extra for Mrs. Pence.”
To families and hardworking Americans struggling to make ends meet, $1,000 is real money with real consequences. It’s real cash that can make a difference in catching up on bills, creating a little rainy day cushion, or breathing a little easier.
Not to mention, that $1,000 bonus is significantly more than the annual raise a minimum wage worker would get under the wage increases common during the Obama Administration. Much more.
Of course, the real benefit accruing to American families from tax reform is not the immediate tax relief, as welcome as that is, nor is it the announced bonuses—see this map of companies investing in their employees and communities. Rather, the real benefit is just on the horizon in the form of a stronger economy, with jobs more plentiful, labor markets firmer, and wages rising more rapidly.
Tax reform will mean much more business investment in new technologies and new machinery so workers will become more productive. Being more productive means being more competitive internationally, and it also means being able to pay the higher wages a tighter labor market demands.
Tax reform also means U.S. and foreign companies are no longer trying to reduce their U.S. business footprint. Instead, they’re looking for ways to shift more of their operations to the United States. Governments around the world are just beginning to grasp fully how U.S. tax reform will transform global investment patterns for years to come, and they're getting a little nervous about it.
But first, there are Nancy Pelosi’s “crumbs.” At a recent event tax reform town hall in Arizona, one audience member shouted out, “How much are you worth, Nancy?” Not surprisingly, Leader Pelosi chose not to answer, instead insisting, “I can speak louder than anyone,” suggesting she could personally drown out any opposing voices.
One should surely not begrudge the Pelosi’s enjoying the full fruits of America’s economic system. Far from it. But the reminder does help in understanding how Nancy Pelosi might not quite grasp the importance of an extra $1,000 for the rest of the country. If bonuses, new business investment, and American businesses gaining a sharper competitive edge in the global economy are the stuff of crumbs, the business community welcomes them with open arms.
Check out this map to learn about businesses investing in their workers and communities because of tax reform.
About the authors
Dr. J.D. Foster is the former senior vice president, Economic Policy Division, and former chief economist at the U.S. Chamber of Commerce. He explores and explains developments in the U.S. and global economies.