• Real wages are rising faster than prices, boosting household incomes by about $1,200 this year, according to former Trump adviser Kevin Hassett.
  • AI-driven productivity growth, potentially reaching 4% next year, is a key driver, reminiscent of the late 1990s tech boom.
  • The gains are linked to recent tax cuts and a strong economic rebound, though debates persist over AI's impact on jobs and inequality.

Kevin Hassett, a top economic adviser to former President Donald Trump, is making waves with his assertion that real wage growth in the U.S. has become "really impressive," drawing direct comparisons to the productivity and pay gains of the 1990s. In recent interviews, he emphasized that real wages are now outpacing inflation, supported by what he calls a "blockbuster" rebound in consumer spending and robust holiday sales figures.

According to people familiar with his discussions, Hassett points to AI-linked productivity growth as a central factor, suggesting it could hit around 4% next year—a surge he explicitly likens to the late 1990s. He contrasts this with what he characterizes as a $3,000 decline in real wages during the Biden years, claiming a reversal under the current administration's policies. "Real purchasing power is up significantly, and we're seeing the effects in strong retail data," he was paraphrased as saying in one policy briefing.

Efforts to boost incomes have included recent tax changes that reduce or eliminate taxes on tips, overtime, and Social Security income, with large refunds expected in early 2026. Hassett links these measures to an overall economic strategy focused on supply-side growth, including deregulation and an "$18 trillion" capital-spending wave, particularly in manufacturing. He defends the administration's use of tariffs, arguing that reshoring production helps profits and wages accrue domestically.

However, the narrative isn't without its critics. While Hassett frames AI as a net positive for wages, some bipartisan lawmakers warn that the technology could push unemployment to 10–20% over five years, highlighting a more pessimistic view of the same shift. In conversations, he acknowledged "mixed signals" in the labor market, such as pauses in hiring, but stressed that output growth remains strong. "AI is creating a 'quiet time' in hiring as firms leverage existing staff for higher productivity," he noted, suggesting this temporary slowdown doesn't undermine real income gains.

Monetary policy is also in focus, with Hassett indicating that a Federal Reserve rate cut is likely and appropriate, comparing the current environment to Alan Greenspan's stance during the 1990s boom. He cites food and grocery inflation around 1.4%, below the Fed's 2% target, as evidence that wage growth is comfortably outpacing price increases. This has fueled consumer confidence, especially after the end of a recent government shutdown, according to market analysts.

Looking ahead, Hassett forecasts real GDP growth of 3–4% in early 2026, driven by AI adoption, tax cuts, and capital investment. He describes the coming period as potentially "one of the golden years in American economic history," pointing to initiatives like "Trump Accounts for Newborns" and new housing policies aimed at affordability. Yet, experts caution that without adequate support, AI could exacerbate inequality and regional disparities, even if aggregate wages rise. Attempts to reach other economists for comment were unsuccessful at press time.

In the broader context, this debate ties into geopolitical competition, with the administration aggressively promoting AI to "dominate China in the AI race," linking domestic wage gains to national security goals. As the discussion evolves, the key question remains how broadly these economic benefits will be shared across the workforce.