Trump’s Policies Punish Working Families As Corporations Cash Out

Trump’s Policies Punish Working Families As Corporations Cash Out

Paychecks fail to cover the basics, and AI investment casts thin veneer over ugly economic reality

Today, the Bureau of Economic Analysis (BEA) released its second estimate of second-quarter GDP, finding that the economy grew at an annualized rate of 1.5%. Growth has averaged just 1.8% over the first half of 2026. The BEA also released its July Personal Consumption Expenditures (PCE) inflation data, which showed prices rose 3.7% over the past year and 0.2% in July alone. Corporate profits rose 9.1% in the second quarter as tariff refunds buoyed balance sheets. Despite passing tariff costs through, corporations, not working families, got refund checks. As if workers weren’t already squeezed enough by high prices, labor’s share of income fell to 54.7%, its lowest level on record.

Groundwork’s Vice President of Policy, Advocacy, and Research Elizabeth Pancotti released the following statement:

“As Trump’s war in Iran and chaotic tariffs continue to push prices higher, paychecks for typical workers are barely keeping pace. Today’s report reveals that corporate bosses and Wall Street investors are cashing in as working families pay the price for the president’s economic mismanagement. Despite his bluster, Trump has built an economy for billionaires while working families are left in the dust.”

Background

Trump’s policies continue to push up the price of everyday necessities.

• PCE inflation rose 0.2% in July and 3.7% over the past year, the fifth straight month above 3.5% and well above the Federal Reserve’s 2% target.
• Trump’s illegal war with Iran is keeping energy prices elevated. Gasoline and other energy goods rose 25.1% from a year ago, and gas sits at $4.10 per gallon. The president’s war has cost the average household $700 more in higher gasoline and diesel prices.
• Families are unlikely to see much relief from high prices in the months ahead: gas remains above $4.00 per gallon, his newest tariffs took effect in late July, and his trade war with Canada has triggered retaliatory tariffs of up to 50% on $20 billion of U.S. goods that start September 8.

Paychecks aren’t keeping up with prices.

• Higher prices have left households with little additional purchasing power. Disposable personal income rose 4.2% over the past year while PCE prices climbed 3.7%. As a result, real disposable personal income is up just 0.5% over the past year.
• Families also have less of a financial cushion to fall back on. The personal savings rate stood at 3% in July, just above June’s 2.6%, the lowest since 2022, lower than the 5.1% before Trump took office.

Businesses continued to bring in more profits even as families faced high prices and weaker growth.

• Corporate profits rose 9.1% in the second quarter, following 1.7% growth in the first quarter, to $4.8 trillion, 22.8% above the second quarter of 2025.
• Workers are receiving a shrinking share of the income businesses generate, even as corporate profits rise. The share of business income going to workers fell to 54.7% in the second quarter, the lowest level on record.

A surge in AI-related investment is making the economy look stronger than it is.

• Much of the economy’s recent growth has come from a narrow boom in AI and data center investment rather than widespread strength. Four-fifths of GDP growth came from business investment in equipment and intellectual property, reflecting the ongoing AI and data center buildout.
  • Moody’s Analytics chief economist Mark Zandi warned last week that economic growth is becoming increasingly dependent on affluent households spending gains generated by the AI-fueled stock market rally.
• Investment in computers and data center equipment grew by nearly 60% over the past year. That single category accounted for more than 7% of the increase in nominal GDP over the year, despite representing just 1.2% of the economy.
• Outside of the AI investment surge, the picture is much softer: consumer spending on goods grew by 2% over the past year – less than half its pace at the start of 2025 – as high prices wear on household budgets.
  • Consumers are increasingly cutting back in the face of higher prices for household essentials. Walmart reported its slowest U.S. comparable sales growth since 2020, with sales rising just 2.6% in the second quarter, down from 4.1% in the first quarter.