Trumponomics: what is it exactly?
The White House indirectly touted “Trumponomics” again in a recent press release that featured the following:
“The U.S. economy continues its streak of consecutive positive monthly job numbers. The unemployment rate edged down 0.1 percentage point over the month to 3.8 percent. This is the lowest unemployment rate in more than 18 years, and its benefits are being felt broadly across America.”
The day before this press release, Dr Stephen Moore of the Heritage Foundation wrote about The Mojo of Trumponomics in Townhall. Early last year, Charles Payne of Townhall Finance covered the Emergence Of Trumponomics. Neither tried to set out what “Trumponomics” exactly is.
Mr Payne did, however, make reference to “Lower Taxes & Regulations = Greater Supply = Higher Employment”. Dr Moore went a bit further by stating that:
“One of the key principles of Trumponomics is that faster economic growth can help solve a multitude of other social and economic problems, from poverty to inner-city decline to lowering the national debt.”
A more detailed take on “Trumponomics” was first presented by me to the Economic Society of Australia (ESA) in mid 2017. My speech to the ESA was based on my experiences as both an economist for over two decades and an economic policy adviser to the Trump campaign in mid-to-late 2016.
In my considered opinion, “Trumponomics” has the following seven (7) pillars:
Being faithful to the Constitution (#1) is the starting point for all of President Trump’s policies. This includes appointing strict constitutionalist judges to the Supreme Court of the United States (SCOTUS) and throughout the broader federal court system. This is key as the American Constitution, unlike any other, is largely about restricting the size of government in general and the size of the federal government in particular.
Tax (#2) reform, in the form of much lower rates and a simpler code for businesses and households, is the key policy that President Trump needs to achieve in his first two years or risk being a “lame duck” for his last two years and not being re-elected. Based on the “Laffer Curve”, significant reductions in tax rates for businesses and households will not only lead to significant increases in economic growth and employment but to significant increases in tax revenue.
Trump adopted the GOP platform since 2009 of repealing and replacing Obamacare (#3). SCOTUS ruled in 2012 that Obamacare is legally a tax. Putting that to one side, the free market externalities and public good characteristics in healthcare barely exist or are, at least, very much exaggerated. In addition, as quoted in my Townhall piece of mid 2015 entitled Obamacare’s Muse – The UK’s NHS:
“National Health Insurance means combining the efficiency of the Postal Service with the compassion of the IRS, and the cost accounting of the Pentagon.”
President Trump is for promoting American energy independence and growth, and thus ending the Obama “war on coal”. He is also a sceptic regarding Anthropogenic Global Warming (AGW). Neither the science nor the cost versus benefits of AGW (much less, so called, “peak oil”) have been proven, not even on relatively low civil law standards of proof and certainly not on much higher criminal law ones. As I wrote in No More Secret Science, Needs No More Secret Economics:
“Many credible folks have been pushing for some time for the EPA to take [a “blue team versus red team”] approach to the science underpinning their regulations and other actions.”
Reducing regulations and controlling regulatory costs is one of the main policies under direct executive control by the President. Very little has been done on this front since President Reagan. Regulation is a more silent economy and liberty killer than tax but less so than money and debt inflation. Quoting CEI in my two-part series of Regulations Are Down But Not Out and The Only Real Regulation Reform Is Deregulation:
“Federal regulation is a hidden tax that amounts to nearly $15,000 per US household each year, more than Americans spend on any category in their family budget except for housing.”
President Trump has flagged a massive rebuilding of infrastructure, paid for, in part, by an expected large influx of tax revenue from the economic growth due to tax cuts. Most public infrastructure in the USA, however, is state and local government responsibility not federal. As written by me in Trump’s Infrastructure Plan: Making Infrastructure Great Again?:
“For the most part, Australia is world best practice on infrastructure and thus provides many valuable lessons for America including from National Competition Policy, privatization and public private partnerships.”
President Trump is not a fan of multilateral trade agreements like the Trans Pacific Partnership (TPP). He points out that such agreements are not “fair” to most Americans. He has even, at times, pointed out that such agreements are not “free trade”. As I pointed out in Trump’s Tariffs: Free, Fair or Foul Trade?:
“The TPP’s 8,000+ pages are not needed for genuine free trade; and the world hasn’t seen much genuine free trade since prior to World War I.”
I had a pillar #8 of The Fed in my original ESA talk. Trump has mentioned auditing The Fed from time-to-time as citizen and candidate but not so much as president. Any such audit should include the whole system of printing unsound money by The Fed combined with fractional reserve banking by the Big Banks. I highlighted the latter in Crony Capitalism: Banks Make Money By ‘Making Money’ by quoting the UK’s equivalent to The Fed of the Bank of England:
“Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them. Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. Bank deposits make up the vast majority [of broad money] — 97% of the amount currently in circulation.”
“Reaganomics” of the 1980s was closely associated with one school of economic thought – Supply-Side Economics. This is not the case with “Trumponomics”. Given the economists and other influencers I know from both the campaign and the administration, “Trumponomics” is an eclectic mix of mainly free marketers with a significant dash of central planners.
The free marketers appear to have a greater say on: #2 Tax; #4 Energy; and #5 Regulations. The central planners appear to have a greater say on: #3 Obamacare; #6 Infrastructure; and #7 Trade. Both at least agree on, and support, #1 Constitution.
Of course, the President is his own man and ultimately calls the shots on what “Trumponomics” is and how it is to be implemented. This will hopefully, and not unreasonably, include #8 The Fed as well as an increasingly free market approach to #3 Obamacare, #6 Infrastructure and #7 Trade. In conclusion, as the Founding Fathers knew, only greater freedom and faith can truly “Make America Great Again”.
This piece was originally published at Townhall Finance.