David Fuller's view -
It’s crunch time in America. The financial markets surged on Donald Trump’s election, on the assumption that his economic policies would, on balance, be pro-growth. Yes, Wall Street rightly loathes protectionism and the tech industry in particular is opposed to proposed restrictions on immigration – but business as a whole hopes that the President’s policies on tax, healthcare, spending, banking, regulation, Energy, infrastructure and, maybe even in time, monetary policy would be neo-Reaganite.
It’s still too soon to tell how all of this will pan out, but time is running out for the Trump administration on the economic front. It needs to get a lot more done a lot more quickly. There is, of course, healthcare reform. But the first real, tangible piece of good news has come from a very different area: there has now been some genuine movement on Energy, with the Keystone pipeline authorisation. That is good news: the US needs to embrace all kinds of domestic Energy production, and other countries should follow suit. The shale revolution has already transformed the US economy, which would be in a far weaker place without it.
But while Trump has delivered on Energy, he will need to turbocharge the rest of his agenda if he wants to keep on side those in business and Wall Street who thought that, despite his many downsides, the new president would end up improving the US economy overall.
Reagan ought to be the Republican role model: a true believer in free market economics, he was a brilliant, lucid and powerful advocate for individual liberty. He cut marginal tax rates and simplified the tax system, while slashing the number of pages in the Federal Register from 70,000 in 1980 to 45,000 in 1986, as a note by Adam Slater from Oxford Economics reminds us.
He did what very few politicians manage: he genuinely took an axe to red tape, deregulated extensively and simplified what rules remained. By contrast, the regulatory burden rocketed under Barack Obama. The Fraser Institute’s index of economic freedom confirms that America became a more free-market and economically liberal economy during the 1980s; in recent years, it has fallen back drastically.
Many of Trump’s economic policies are not that different from Reagan’s. However, Trump should have prioritised economic policies from the first days of his administration, rather than wasting his initiative on political disputes and repealing Obama’s healthcare programme. This has been politically divisive, while policies for economic stimulus would have had much more cross-party support. They may be harder to pass in future.
Ironically, perhaps today’s realisation by Trump and Paul Ryan that they do not currently have sufficient support to repeal the Affordable Care Act cause them to refocus on policies for increasing GDP.
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