Employee bonuses are a tax reform 'gimmick,' ex-Treasury chief Summers says

  • Former Treasury Secretary and Obama administration economic advisor Larry Summers says employee bonuses related to tax reform are a "gimmick."
  • Summers has been critical of President Trump's economic policies, once saying he would have resigned if he was the current Treasury chief.
  • Some 261 companies have announced bonuses, wage hikes or increases to 401(k) programs directly linked to the Tax Cuts and Jobs Act.

Former Treasury Secretary and Obama administration economic advisor Larry Summers said Friday that recent employee bonuses are stunts and not reflective of long-term hopes for prosperity that tax cuts are supposed to bring.

"I think it's a gimmick," Summers told CNBC's "Squawk Alley." "I think in many cases the firms have to raise wages because labor markets are tight, and so why not curry some favor with the White House by linking it to the tax cuts."

Summers ran Treasury during Bill Clinton's presidency and was director of the National Economic Council under former President Barack Obama.

His derision toward the employee bonuses was part of a broader and continuing criticism of the Trump administration's economic policies, and more recently the reform plan Congress passed in November that slashes corporate tax rates.

Since the measure passed, 261 companies have announced bonuses, wage hikes or increases to 401(k) programs directly linked to the Tax Cuts and Jobs Act, according to Americans for Tax Reform. The moves have benefited at least 3 million workers, the anti-tax group said.

While Trump has bragged of the act's impact on workers, Summers said he isn't that enthused.

"That's a very common device: If you want to give somebody some money but you don't want to promise it to them on a continuing basis, you frame it was a bonus," he said. "Look, the corporate tax cuts are going to be forever. If the firms really believe this had to do with corporate tax cuts, why aren't they committing to bonuses forever?"

Summers insisted that the Obama administration took a "more grown-up approach" to labor economics by tracking monthly job creation numbers "rather than focus on high-profile announcements from particular companies."

While the Trump economy looks on track to attain the 3 percent annual growth that eluded Obama throughout his administration, Summers doubted its durability.

"You have a lot of stuff here that is PR, and if you look at the fundamentals of the economy, certainly this quarter's numbers were happy numbers, no doubt about it," he said. "How long that's going to last, I think, is very much in question."

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