Are the bonuses and wage boosts the start of a new economic dawn, or just a sugar high?
Republicans are basking in a wave of good publicity for their giant tax cut.
WalMart, the nation’s largest private employer, just bumped up its minimum wage. Cash bonuses are flowing to employees from major employers including AT&T, Comcast and big banks due to the big corporate tax cut. Automakers and giant engineering companies are promising big new U.S. investments.
The result is a giddy sense of hope for President Donald Trump and congressional Republicans who pushed through their unpopular tax-cut plan over total opposition from every Democrat in Congress.
“Great news, as a result of our TAX CUTS & JOBS ACT!,” Trump tweeted following the announcement by WalMart that it would boost its minimum wage by a buck, to $11 per hour.
Treasury Secretary Steven Mnuchin showed up in the White House briefing room Thursday to discuss how paychecks would climb next month and take a victory lap. “We thought it would be great for the economy, and we’re thrilled with, already, the number of companies we see reacting accordingly,” he said.
But economists have a warning: Enjoy it while it lasts.
While the wage hikes and bonuses are undoubtedly positive, they may produce only a temporary economic boost that fades in later months. Gains could be undercut by rising deficits caused by slashing federal revenue by at least $1.5 trillion over ten years.
“It will come at a cost,” New York Fed President William Dudley said Thursday in remarks to bankers in lower Manhattan. “There is no such thing as a free lunch.”
A number of crosscurrents could slow any boost from lower tax rates. The Federal Reserve is already hiking interest rates and could be forced to move faster if the bill creates a spike in inflation. Oil prices are rising again, sending gas prices above $3 a gallon in some areas of the U.S. and potentially offsetting the benefit of bigger paychecks.