Reuters
U.S. President Donald Trump greets AT&T CEO Randall Stephenson (C) as he arrives for an event highlighting emerging technologies, in the East Room at the White House in Washington, U.S., June 22, 2017
- It could be that AT&T is just giving out bonuses because that's what it wants to do with its tax cut money.
- Or it could be that the company is trying to curry favor with the Trump administration during a contentious merger.
- Either way, American workers need material wage increases if there's going to be economic growth, not one-time bonuses.
There are two ways to look at AT&T's announcement that it will pay $1,000 bonuses to workers thanks to the GOP tax cut.
You can say to yourself, "tax cuts work!" And credit President Donald Trump and the GOP with changing corporate culture forever.
Or you can see it for what it is - an attempt to curry favor with the Trump administration by handing employees a one-time check that is a fraction of a fraction of a fraction of the kind you see in the C-suite.
You recall that AT&T is trying to take over Time Warner and that the Justice Department (DOJ) is planning to block the deal.
The fact that the DOJ is giving AT&T any grief about this $84.5 billion move has raised eyebrows across the country. What AT&T is trying to pull off is a vertical merger - when two companies at different ends of the supply chain for a product come together. AT&T does distribution, Time Warner does content.
In the past, the DOJ has said that these kinds of mergers are okay. What the DOJ does not care for are horizontal mergers, when one company starts gobbling up all the companies that do what it does, creating a monopoly.
So if anyone wants to curry favor with the Trump administration, it's AT&T. Thus (if you're cynical) the following statement:
"Once tax reform is signed into law, AT&T plans to invest an additional $1 billion in the United States in 2018 and pay a special $1,000 bonus to more than 200,000 AT&T US employees - all union-represented, non-management and front-line managers," CEO Randall Stephenson said in a press release. "If the president signs the bill before Christmas, employees will receive the bonus over the holidays."
(Stephenson, for what it's worth, made about 1/8th of what it'll cost to pay all those employees in 2016 - over $24 million. But that's neither here nor there.)
What is more important is that with these bonuses AT&T is providing the Trump administration and the GOP with proof of concept. They said that tax reform would lead to rising wages, and looked at it most simply, that's what this bonus is.
Of course, again - this is a one-time payment, not an actual salary increase. And the tax withholding on a bonus is typically higher than that on regular wages, so AT&T employees will see less of that money in their pockets. But still, Trump can chock this up as a win. And AT&T wants nothing more than to make him feel like a winner right now.
Like these bonuses, however, that feeling is likely to be temporary. Wall Street banks have been predicting that this bill will have little impact on wages - or the economy at large, for that matter - from the beginning. A recent Bank of America Merril Lynch survey of 302 US companies found that 65% of respondents are going to use their tax cash to pay down debt.
And how could anyone forget the awkward moment when White House advisor Gary Cohn asked a bunch of CEOs to raise their hands if they were planning to reinvest the money they got from tax breaks, and no one moved a muscle. This is sad, higher wages and business investment are the elixirs this economy has been missing since the financial crisis. You can even say it's been missing for the last 30 years. This tax plan isn't what's going to spur it on though.
None of this is to say I'm not excited for everyone at AT&T who's getting that extra cash. Spend it well. Not everyone has the ability to drop a bunch of cash just to impress the President of the United States.
This is an