How have independent economists evaluated the net employment and wage effects of Trump's tax and deregulation policies?
Executive summary
Independent economists broadly agree that the 2017 tax cuts and deregulatory push produced short-run boosts to business confidence, investment, and hiring, but they disagree sharply about the lasting impact on wages and net employment once tariffs, debt dynamics, and distributional effects are accounted for [1] [2] [3]. Nonpartisan modelers and many academic critics conclude that any early gains mostly dissipate or are offset by other policies—especially tariffs and rising deficits—leaving average wages little changed or lower over the medium to long run [1] [3] [4] [5].
1. Short-run lift, documented by business surveys and administration reports
Proponents and some empirical snapshots show the immediate aftermath of tax cuts and deregulation coincided with stronger business sentiment, a rise in business investment and GDP growth, and a tight labor market that pushed some wage gains—findings emphasized in Hoover and White House analyses and reflected in NFIB and other firm-level surveys cited by the administration [1] [6] [7]. The Council of Economic Advisers argued that deregulatory measures lowered firms’ costs, increased labor demand, and contributed to wage gains for some historically disadvantaged groups [2] [8] [9]. Those are the short-run mechanics most defenders point to.
2. Tariffs and trade policy as countervailing forces
Independent researchers repeatedly point out that the tariff program beginning in mid-2018 undercut gains in manufacturing employment and raised costs for U.S. consumers and firms, muting any positive effects from tax cuts or deregulation; Hoover’s evenhanded assessment specifically finds manufacturing job gains reversed by tariffs [1], and Stanford’s SIEPR brief reports that the tariffs were largely borne by U.S. consumers—especially lower-income households—thereby reducing real incomes and demand [5]. Multiple economists therefore treat the net policy package, not the tax cuts alone, when judging employment and wages [1] [5].
3. Medium- and long-run modeling: wages not meaningfully higher, sometimes lower
Rigorous nonpartisan modeling by the Penn Wharton Budget Model projects that after initial increases in capital and hours, average wages are essentially unchanged by 2034 and decline by about 1.7% by 2054 under the Trump campaign’s tax-and-spending proposals—an outcome driven by debt-financed cuts, shifting investment patterns, and international capital flows [3]. Independent academic work cited by outlets like Foreign Affairs similarly finds the 2017 tax cuts generated far less growth than projected and materially increased deficits, undermining long-term wage gains [4]. These studies argue the fiscal cost of tax cuts limits scope for sustained, broadly shared wage growth [3] [4].
4. Distribution: gains concentrated at the top, limited pass-through to typical workers
Several independent economists and commentators note that much of the corporate tax savings flowed to shareholders via buybacks and dividends rather than large wage increases for rank-and-file workers; Larry Summers famously challenged administration claims about large per-worker wage gains from the corporate cut [10]. Hoover and other analysts concede deregulation and tax cuts raised investment and confidence but stress offsetting effects—tariffs and distributional concentration—left net benefits small for typical workers [1] [2] [10].
5. Consensus, dissent, and political framing
While administration-sponsored studies (CEA, White House reports) emphasize employment gains and disproportionate benefits for previously disadvantaged workers [7] [9], a robust body of independent work—academic modelers, nonpartisan budget offices, and many surveyed economists—cautions that short-lived boosts do not translate into durable wage growth and that tariffs and fiscal deficits meaningfully offset or reverse employment gains in key sectors [3] [4] [5]. The divergence partly reflects different methodologies and political agendas: government reports measure selected benefits and deregulatory cost savings [7], whereas independent modelers fold in dynamic budget effects, distributional outcomes, and tariff interaction [3] [5].
Conclusion: net effect judged modest-to-negative by many independent economists
Independent evaluations converge on a pragmatic verdict: tax cuts and deregulation produced measurable short-term employment uplift and some wage pressure in a tight labor market, but when analyzed in the context of tariff-induced distortions, fiscal crowding-out, and distributional pass-through, the medium- to long-run net effect on average wages is weak at best and possibly negative—especially for lower- and middle-income workers—according to Penn Wharton, academic studies, and skeptical commentators [1] [3] [4] [5]. Where claims differ, readers should note the source—administration analyses frame deregulation benefits more prominently, while independent researchers emphasize offsetting macro and distributional forces [7] [3].