Trump's “Administration of Lies” Spreads to Economic Theory

Cutting Corporate Taxes Will Raise Employee Compensation – Huh?

One result of the election of an individual totally unqualified to be dogcatcher, much less President is that public officials are no longer held to the truth in supporting their policy proposals. So it is not really a surprise that the economic advisers in the administration go out and lie about the effect of cutting corporate taxes will have on employee compensation.

In a sign of how heavily the administration will lean on the argument, the president said last week in a speech in Pennsylvania that the proposal would “likely give the typical American household a $4,000 pay raise,” citing his Council of Economic Advisers.

The council is led by Kevin Hassett, an economist whose academic work has argued that high corporate tax rates hurt workers, and that when those tax rates fall, worker incomes rise sharply. The Monday report is the council’s first published study on the potential effects of the tax proposal.

How exactly does that happen? Maybe like this. When corporate taxes go down CEO's all around the country gather and say things like “You know, we have all this extra money now. Instead of increasing our pay or giving it to shareholders let's raise hourly rates and salaries of our middle managers. They deserve it and besides we have a lot of money anyway and the increased profits are just a windfall.” Yep, that's sure to be what happens.



The interesting thing is that the report this garbage is based on contradicts it in its first sentence.

The report begins with a declaration that “wage growth in America has stagnated,” even as corporate profits have soared, because “the relationship between corporate profits and worker compensation broke down in the late 1980s.”

That's right, for the last several decades corporate profits have sharply increased while real wages have been stagnant. So increasing corporate profits will increase wages? Right.  As for the economics, take a look at any college text on the subject and try to find this idiocy.