The economic vitality experienced during the 80s and 90s is gone, and the perception is that America’s best days are behind it. For President Trump to be successful, he will have to reverse the malaise of the Obama years with economic growth in excess of 3% – something not seen in a decade.
Left to their own devices, American workers and entrepreneurs would naturally achieve high rates of growth; unfortunately, they have to carry the government on their backs. In reviving the economy, the Trump administration should focus on achieving deregulation, cutting taxes and restraining spending. Deregulation has the virtue of being under the sole authority of the president.
While technically the president must “take care that the laws be faithfully executed”, the reality (as illustrated by Obama) is that a president has an almost unlimited ability to refuse the enforcement of laws with which he disagrees. This includes writing executive orders redirecting priorities away from offending statutes, revision or rescission of relevant regulations, or wholesale elimination of personnel responsible for enforcement.
Independent estimates place the burden of regulation upon the US economy in excess of two trillion dollars per year. Trump and congressional Republicans are right to target Obamacare as the worst and most damaging, to healthcare specifically, and employers in general, but there are over a thousand major regulations, each with price tags in excess of $100 million annually.
The Environmental Protection Agency is one of the worst offenders, accumulating 43 new major rules in 2015 alone, costing some $11 billion annually. The Agency openly promotes the notion that every atom within the borders of the United States from the inner mantle to outer orbit is its personal property; it welcomes any means to limit economic activity in furtherance of its climate change hysteria.
Rather than accept the job-wrecking unconstitutional monstrosity that the EPA has become, the Trump administration should shut it down, and replace it with a framework whereby states could bring complaints against each other for pollutants that cross state lines. Such complaints could be arbitrated by a third party states with an appeals process involving larger numbers of states. The proper role of the federal government is to adjudicate large disputes among the states as a last resort, not to dictate the required depth of every mud puddle on old MacDonald’s farm.
Dodd-Frank is to the financial services industry what the EPA is to property rights and energy. Rather than repeal government regulations that force banks to make loans to people who can’t pay them back, liberal Democrats joined by establishment Republicans blamed the 2008 financial crisis on banks that bought and sold the loans that they foolishly believed possessed value.
Instead of breaking up ‘too big to fail’ institutions by limiting their capital assets and forcing a reduction in their debt-to-equity ratios, Dodd-Frank enshrined too big to fail institutions as ‘systemically important’ with the implicit guarantee of tax payer bailouts, allowing them to benefit from lower borrowing costs, while engaging in risky activities.
Politicians did not shut down Fannie Mae and Freddie Mac after authorizing them to pump trillions of dollars into the housing market to buy up subprime loans; instead, they buried the financial services sector under mountains of red tape just to pretend they’d solved the problem.
Regulations in the financial sector – and across the economy in general – act as barriers to entry for smaller firms who cannot afford the crushing cost of compliance. These barriers stifle innovation by preventing competition, and encourage behemoth mergers to streamline regulatory costs. Mega corporations wield enormous influence and further distort the marketplace by manipulating lawmaking and rule writing.
In many instances throughout government operations, regulations are so vague, contradictory or incomprehensible that even good faith efforts run afoul of bureaucrats eager to assert arbitrary power. Nowhere was this better illustrated than the IRS abuse of Obama’s political enemies, where leftwing organizations got tax exempt status in weeks, while rightwing organizations have had to wait years and endure limitless harassment.
President Trump’s picture will go up on the foyer walls used by two million non-defense federal workers, but that won’t do anything more than provide them the opportunity to spit on his image twice a day. As orders and priorities are passed down from the Oval Office to political appointees, and then to leftwing career bureaucrats, the drive to erase decades of ‘achievement’ will be quietly strangled.
Any cabinet officer serious about cutting the regulatory burden of their department by even one-third would have to drop the equivalent of a neutron bomb on the Senior Executive Service, and do so enough times for their replacements to get the message.
Since no cabinet officer would willingly bring down the wrath of the Washington establishment and the press on their heads, the President would have to personally direct what would become a very dirty war against entrenched bureaucratic interests.
Trump has made noises about closing the EPA and the Department of Education, as well as requiring the repeal of two regulations for every new one, but until an army of enraged bureaucrats starts burning and looting on Pennsylvania Avenue, one can be confident that not much has really happened.
Even a halt to – or modest rollback of – regulations would have a beneficial effect. Businesses would no longer be paralyzed by the fear of Washington destroying their profit models, but if Trump wants to achieve anything beyond a temporary pause in runaway regulations, and jump-start the economy in a meaningful way, he will have to make very deep cuts.
While the usual suspects will rage against him, just as they raged against Bush ’43 for supposedly wanting to put arsenic in the water, Trump will ultimately benefit by an improving economy. The best strategy Trump could employ would be to assemble a target list of policies and personnel, and execute all items on the list simultaneously. Such a move would overwhelm the liberal outrage machine’s ability to respond to individual initiatives.
As reforming the tax code is a major Trump objective, he could do worse than liquidating the IRS, both as just retribution for their partisan venality and to illustrate his seriousness in negotiating from a clean slate. The insane complexity of the tax code is another market-distorting, job-killing regulatory regime.
Abolishing the IRS would free up $400 billion in compliance costs and 9 billion man hours spent each year filing out useless paperwork. But then again, why would any president want an 80% approval rating?
The author has worked on numerous statewide political campaigns in Virginia, South Dakota and Washington, D.C. His work has appeared in The Federalist, the Daily Caller and other sites. He currently resides in the Washington, D.C. area. Follow him on Twitter @PHGuthrie