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Joint Economic Committee Democrats Chairman - Senator Martin Heinrich (D-NM)

Bank Profits Are At All-Time Highs Following Tax Cuts

August 27, 2018

Economic Facts for This Week

  • Republican sabotage is pushing health insurance premiums higher. Last year, premiums increased more than projected in 45 states and the District of Columbia.
  • The Trump administration has undermined protections for Americans paying back over $1.5 trillion in student loans.
  • Maintaining full employment is key to wage growth. For the median worker, their average hourly wage rose 1.7 percent per year between 1996 and 2001 (arguably the only period of extended full employment in the last four decades). Excluding this period, the median worker has averaged 0 percent wage growth per year since 1979.
  • Medicaid work requirements would disproportionately hurt rural residents and communities, due to higher rates of Medicaid enrollment, higher unemployment rates, frequency of variable-hour employment, and lower access to broadband.
  • Rising income inequality is increasing racial inequalities. The Republican tax plan will exacerbate this trend.
  • Latest estimates from Penn-Wharton confirm that indexing capital gains to inflation would not lead to higher economic growth. 

Chart of the Week

 

 

Bank profits have never been higher. The FDIC reported last week that profits at the commercial banks and savings institutions that it insures have ballooned since the tax cuts. In the second quarter of the year, FDIC-insured institutions earned $60 billion. The reduction in their effective tax rate due to the Republican law added $6.4 billion to banks’ bottom lines.

Tracking Trump’s $4k Promise

During the tax cut debate, the White House claimed that the average American household would see an income increase of $4,000 a year because of the tax cuts. Below are some indicators looking at whether or not Republicans are living up to their promise:

  • Stock buybacks are at record highs, with public companies announcing more than $750 billion in stock buybacks so far this year. Goldman Sachs projects buybacks could soar to $1 trillion by the end of 2018.
  • Average weekly wages for production and nonsupervisory workers are just 2 percent higher than they were before the new tax law, before adjusting for inflation.
  • The average hourly wage for production and nonsupervisory workers—our best measure of the median workers’ take home pay—was lower in July 2018 than it was in July 2017, after adjusting for inflation.   

ICYMI

  • A new JEC podcast discusses what’s at stake with President Trump’s nominee to head the Consumer Financial Protection Bureau (CFPB).
  • Forty-eight percent of DACA recipients would be less likely to do business that requires personal contact info (such as opening a bank account or taking out a loan) if DACA is rescinded, according to a new survey.
  • Former CEA chair Jason Furman encouraged the Fed to raise banks’ capital requirements while the economy is doing well, using its authority under Dodd Frank.
  • Climate change will hurt a wide span of sectors, according to a new Richmond Federal Reserve brief.

Coming This Week

Permalink: https://www.jec.senate.gov/public/index.cfm/democrats/2018/8/bank-profits-are-at-all-time-highs-following-tax-cuts

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