Commentary Magazine

Nancy Pelosi’s Crumbs Will Power the Economy

AP Photo/J. Scott Applewhite

Nancy Pelosi dismissed the bonuses associated with recently enacted tax cuts for middle-class individuals as “pathetic” and mere “crumbs.” For someone who lives in the Pacific Heights neighborhood of San Francisco (the most expensive neighborhood in the United States), when not relaxing at her vineyard in the Napa Valley, the financial benefits associated with tax code reform are, to be sure, no more than rounding errors. But for the average citizen–a demographic the Democratic Party claims to represent–they are very real.

Forbes reports that, with the new withholding tables just out from the IRS, a family of four with an income of $120,000 a year will see paycheck increases totaling more than $3,578, or almost $300 a month. Even a single person with an income of $40,000 will have at least $1,023, or $85 a month, more to spend. For the citizens of “fly-over country” and the vast middle-class suburbs around major cities, if not for the denizens of Pacific Heights, that’s real money.

And Veronique de Rugy, an economist at the Mercatus Center, a free-market think tank, sees a tightening labor market as at least partially responsible for the spate of bonuses and pay increases that immediately followed the passage of the tax bill. (Home Depot has just joined the list of companies giving bonuses to hourly workers). Wages have been stubbornly “sticky” during the slow Obama recovery, but that would change with a tight labor market. We’re at 4.1 percent unemployment right now, and 4 percent is considered full employment. Moody’s is predicting unemployment at 3.5 percent by the end of the year; a very tight labor market.

And Bloomberg expects the 4th quarter of 2017 to be the third in a row to see more than 3 percent growth in GDP, the first time that’s happened since 2005. (The figures will be out on Friday.) Since 70 percent of the economy is household consumption, and the disposable incomes of the middle class are going up and promise to go up further in coming months, the economy could grow at around 3 percent for the foreseeable future.

Oh, and Apple is bringing $252 billion in profits it has had parked overseas to this country (paying a tax bill of $39 billion in the process) and will “put some of the money it brought back toward 20,000 new jobs, a new domestic campus, and other spending.”

Even Nancy Pelosi would consider $252 billion in new capital to be invested in the American economy as real money.

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