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American inequality will widen under Trump in 2017
December 29, 2016 / 4:07 PM / in 10 months

American inequality will widen under Trump in 2017

WASHINGTON (Reuters Breakingviews) - Donald Trump won the U.S. presidency on a pledge to fix a system rigged against the middle and working class. Over time, maybe he will. But in 2017, look for wealth and income inequality to widen. Though pitchforks lifted the real-estate developer to the White House, the irony is that his proposed economic policies look set to immediately help rich folks the most.

U.S. President-elect Donald Trump gestures as he speaks during a USA Thank You Tour event in Mobile, Alabama, U.S., December 17, 2016. REUTERS/Lucas Jackson

Rising income disparity got Trump elected and nearly vaulted a socialist senator from Vermont into the Democratic nomination. It’s easy to see why: from 2009 to 2015, the wealthiest 1 percent of Americans captured 52 percent of total real-income growth, according to the Washington Center for Equitable Growth, leaving the scraps for the remaining 99 percent of households to fight over.

It’s hard to see how Trump’s economic policies can rectify that. Under his tax proposal, the wealthy would get the biggest break. The top 1 percent of earners could see a 16 percent boost in after-tax income, while the lowest 80 percent would get a maximum 1.9 percent bump, according to the Tax Foundation’s analysis.

The well-endowed will benefit further from Trump’s plan to provide one-time tax relief to companies that have $2 trillion in cash stashed overseas. Goldman Sachs estimates 75 percent of the funds brought home would go toward share buybacks. That’s another lift for higher-income individuals, who comprise the bulk of stock-market investors, and who have already benefited from a post-election rally. 

Trump’s threats to scrap trade deals and impose tariffs on Chinese and Mexican goods could increase unemployment, particularly in manufacturing, especially if those nations retaliate. Jobs would be lost in construction equipment, semiconductors, turbines, aerospace and other sectors, the Peterson Institute says. Employment will fall by at least 4 percent in the Rust Belt states that ultimately decided the election’s fate, the think tank projects.

Lastly, Trump’s $1 trillion infrastructure plan relies on raising some $167 billion in private equity. As an incentive, backers would receive tax credits. But financiers would still need a payment stream equivalent to around a 10 percent rate of return. That will favor projects with tolls or those that circumvent low-income areas.

Trump is counting on trickle-down economics to help the masses. But before it gets to them, it will first line the pockets of the well-to-do.

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