President-elect Donald Trump made faster economic growth one of his major campaign themes and the direction of Trumponomics is already beginning to take shape. His major cabinet choices so far auger well for the fundamental changes which are needed to speed up economic growth:
Steven Mnuchin for Treasury. Mr. Mnuchin says that “the number one problem with Dodd-Frank is that it is way too complicated and cuts back lending.” Making loans is “the engine of growth to small- and medium-sized businesses.” He also believes that 3% – 4% GDP growth is possible with tax and regulatory reform.
Tom Price for Health and Human Services. Mr. Price has some excellent ideas for getting American healthcare straightened out, in order to make it more consumer-oriented as well as less costly for individuals, businesses and the government (i.e. the taxpayers).
Scott Pruitt for the Environmental Protection Agency. Mr. Pruitt is a lawyer who has fought EPA overreach as the Attorney General of Oklahoma. Mr. Pruitt will end up improving the environment because “he will make sure that the rules issued by the EPA are rooted in law and thus won’t be overturned in court.”
Betsy DeVos for Education. Ms. DeVos, a school reformer from Michigan, is a strong supporter of vouchers and charter schools. K-12 school reform is absolutely essential to better prepare low-income and minority students for the high tech and global economy which awaits them after graduation.
General James Mattis for Defense and Senator Jeff Sessions for Attorney General are also excellent choices for strengthening America’s national security and moral fabric.
Conclusion. I have been advocating fundamental changes in fiscal and economic policy for years now and, thanks to the election of Donald Trump, things are moving rapidly in this direction. It is a good time to be optimistic about the future of our country.
As the readers of this blog well know, I am very concerned about the fiscal and economic direction our country has been taking in recent years. I voted for Hillary Clinton in the 2016 presidential election because of Donald Trump’s crude and sleazy behavior. However we need basic change in the U.S. and Mr. Trump is clearly a change agent.
As the new Trump administration begins to take shape, here is what I see happening:
Treasury Secretary designee, Steven Mnuchin, says that tax cuts for both upper-income and middle class taxpayers will be offset by “less deductions that pay for it.” Revenue neutral tax rate cuts will increase both consumer and investment spending, without increasing our debt, and will give the economy a huge boost.
Health and Human Services Secretary designee, Rep Tom Price, is an expert on health-care and wants to replace the Affordable Care Act with a new healthcare program which provides more consumer choice at a much lower cost.
The Great Rebuilding. Infrastructure investment is needed but it should be accomplished with a lower corporate tax rate and repatriated profits of multinational corporations to avoid increasing the deficit.
Holdback on excessive fiscal stimulus. With the unemployment rate down to 4.6%, a dollar which has already appreciated 40% since 2011, and tax cuts on the way, inflation and higher interest rates are in the offing. Let’s not overdo it.
Living on borrowed time. As shown in the above chart, interest rates are very, very low and are likely to rise significantly in the near future. When this happens, our massive public debt (on which we pay interest) of 76% of GDP will become very expensive to service. Ouch!
Conclusion. One can see a Trump agenda emerging which has the potential to be very successful if it is coupled with overall spending restraint.