Remember just before the new year when Donald Trump signed into law the Republican “Tax Cuts and Jobs Act?”
Basically, it was the tax bill that handed $1.5 trillion in permanent tax breaks to corporations and the wealthy like Trump and his ilk.
Remember how Republicans promised it would result in higher middle-class wages?
Nearly a year into it, it appears that not only are CEOs actually coming right out and admitting they will not increase employee pay. Since the tax cuts passed, businesses have been using their additional capital to pay off shareholders–not employees–to the tune of more than $700 billion.
This became most apparent last week after General Motors announced its plan to lay off estimated 14,700 jobs, ostensibly to “make General Motors more agile, resilient and profitable,” according to CEO Mary Barra.
The company argues the cuts are necessary to prepare for the transition to autonomous vehicles.
This is in stark contrast from the message GM delivered in January 2017 when it announced plans to invest $1 billion in additional manufacturing in the United States and add or leave 7,000 jobs in the country.
As it turns out, however, GM would have been able to retain its employees had it not spent $10.6 billion since 2015 buying back its own shares.
Ohio Democratic Sen. Sherrod Brown decried the situation as “shameful,” tweeting:
“The company reaped a massive tax break from last year’s GOP tax bill and failed to invest that money in American jobs, choosing to build its Blazer in Mexico.”
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, commented:
“[T]hat money could have been used in different ways, including investment in older plants. But would that be a good way to use the earnings? Mary Barra thought not. She decided that the money should be taken out of the company and returned to shareholders. It’s really quite a statement about where she thinks the traditional auto sector in the U.S. is headed.”
The Institute for Taxation and Economic Policy stated:
“This trend flies in the face of the Trump administration’s promise that the corporate tax provisions—especially a tax holiday for profits stashed offshore, of which GM appears to have had as much as $6.5 billion—would spur a flood of new domestic investment.”
But the GOP tax scam is not the only culprit.
According to an NBC News report, GM has lost $1 billion due to Donald Trump’s tariffs on steel and aluminum.
Robert E. Scott, a senior economist at the Economic Policy Institute (EPI), stated:
“They [economists] can read the crystal ball and see what’s coming. This is the chickens coming home to roost on the broader Trump economic policies.”
He added:
“If nothing is done to address the problems created by Trump’s budget and failed trade policies, the problem is going to get worse.”
In September, Ford CEO James Hackett said Trump’s tariffs cost the company about $1 billion in profit.
Mark Muro, a senior fellow at the Brookings Institution, has researched changes the digital age is inflicting on business practices.
He said:
“This is a big mega-trend pervading the whole economy.”
Layoffs are also likely to expand to auto parts suppliers due to the decreased need to design and build parts as many parts for conventional vehicles.
Compounding the problem, Reuters reports tariffs on imported auto parts of up to 25 percent threatens to subject consumers to higher automotive repair costs, insurance premiums, and theft of cars for their parts.
Image credit: Wikimedia Commons
