Addressing a joint session of Congress on February 28, President Trump charted his path to restoring booming economic growth — major tax reform, repeal/replacement of Obamacare, massive deregulation and more.
Early in his speech, Trump recognized that under President Obama’s left-wing economic policies, America has never really recovered from the steep 2008-09 recession. It was Milton Friedman, the greatest economist of the 20th Century, who first identified that America’s historical economic pattern has long been the deeper the recession the stronger the recovery.
Given that metric, America should have come out of the recession in the summer of 2009 with a booming recovery. From the depths of the 2008-09 recession, that recovery should have achieved real economic growth of 5 to 6 percent for at least 2 years, settling down to 4% annual real growth thereafter.
But today, nearly 8 years later, that recovery still has not happened. Instead, real annual growth under President Obama’s two terms averaged less than 2%, which qualifies as the Worst Recovery from a Recession Since the Great Depression. Compounded over decades, Obama’s growth rates would fundamentally transform America into a Third World Country.
That was reflected in the woeful statistics Trump cited regarding the economy we have inherited from the Obama Administration. “Ninety-four million Americans are out of the labor force,” Trump reported. “Over 43 million people are now living in poverty, and over 43 million Americans are on food stamps. More than 1 in 5 people in their prime working years are not working. We have the worst financial recovery in 65 years,” Trump summarized.
Obama’s first act in office was to increase federal spending by nearly $1 trillion in his so-called “stimulus,” with record annual deficits of over $1 trillion in each of his first four years, 4 to 6 times the largest annual deficit of the Reagan years of $225 billion. That is why, as Trump noted in his speech, “In the last 8 years, the past Administration has put on more new debt than nearly all other Presidents combined.” No previous President has ever ran a deficit anywhere near a trillion dollars, even during World War II.
In his address to Congress, Trump returned to Reagan’s consistently pro-growth policies, which led to booming growth that lasted 25 years, from late 1982 to late 2007. Trump endorsed tax reform, reducing tax rates to “create a level playing field for American companies and workers…Historic tax reform will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone. At the same time, we will provide massive tax relief for the middle class.”
“Right now, American companies are taxed at one of the highest rates anywhere in the world,” Trump added. AEI President Arthur Brooks explains in the current issue of Foreign Affairs that “On average, between federal and state policies, U.S. companies pay a tax rate of around 39 percent. That is far above the worldwide average of 22.5 percent and even more out of alignment with the average rates paid by companies in Asia (20.1 percent) and Europe (18.9 percent).” Trump proposes to reduce that rate to 15 percent, which Brooks reports can be done on a revenue neutral basis as proposed in a study by economists Alan Viard of AEI and Eric Toder.
Trump also called on “Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better Healthcare. Mandating every American to buy government-approved health insurance was never the right solution for America. The way to make health insurance available to everyone is to lower the cost of health insurance, and that is what we will do.” Those policies would reduce taxes, regulation, and government spending by trillions more.
“Obamacare premiums nationwide have increased by double and triple digits,” Trump noted. The regulatory costs and burdens were the cause of those premium increases. When those regulatory costs are removed, premiums will decline. That will be effectively another tax cut for the middle class and working people.
“One third of counties have only one insurer on the exchanges –- leaving many Americans with no choice at all,” Trump further recognized. Eliminating costly and counterproductive regulations will restore competition to all of those markets. Increased competition will further reduce premiums. Repealing the employer mandate and all of its costs will restore millions of full-time jobs employers nixed to avoid triggering the mandate.
Block granting Medicaid back to the states would free states to arrange for assured health care for the poor, through private health insurance vouchers or managed care for the poor. Along with a Universal Health Insurance Tax Credit, the Republican replacement for Obamacare, delivering as well on the original promise of affordability with lower premiums, would cover more people than Obamacare, which never got anywhere near universal coverage.
For deregulation, Trump announced creation of “a deregulation task force inside every government agency.” That would be focused in particular on energy deregulation, which would stop “regulation that threatens the future and livelihoods of our great coal miners.”
With modern technology, America has the resources today to be the world’s number 1 producer of oil, the world’s number 1 producer of natural gas, and the world’s number 1 producer of coal, all at the same time. That energy production liberation, aided further by the deregulation involved in freeing the Keystone and Dakota pipelines, would provide a mighty new booster rocket to the American economy.
Trump’s economic program consequently includes all the components of the extraordinarily successful Reagan economic program. With the long overdue recovery from the grievous 2008-09 recession, that comprehensive, supply-side production liberation holds the potential for the greatest economic boom in American history.
Lewis Uhler is Founder and Chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with both Ronald Reagan and Milton Friedman in California and across the country. Peter Ferrara is Principal and General Counsel for the Raddington Group, an international economic consulting firm, and a Senior Fellow with the Heartland Institute and NTLF. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.