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.
Donald Trump was elected to be our next president because of the huge desire for change amongst the American electorate. Many things need changing, but among the most important is our healthcare system. The problem is that we are spending 18% of our GDP on healthcare, twice as much as any other developed country. The Affordable Care Act has increased access to healthcare but does very little to hold down costs. This is one reason why it is so unpopular and needs to be substantially modified. President-elect Trump has nominated Representative Tom Price (R, Ga) to head up Health and Human Services in his cabinet. Rep. Price is an expert on healthcare and is a leading advocate for replacing the ACA with something more workable. He will soon be in position to lead the charge for healthcare reform.
The two American Enterprise Institute scholars, James Capretta and Scott Gottlieb, have some good ideas for what needs to be done.
Provide a path to catastrophic health insurance for all Americans. The idea is that all Americans who do not get health insurance through employers, or Medicare or Medicaid, should be eligible for a refundable tax credit sufficient to pay for a basic level of catastrophic (i.e. with a high deductible) insurance coverage.
Accommodating people with pre-existing health conditions. Everyone who maintains continuous (catastrophic, as above) coverage would be allowed to move from employer coverage to the individual market without facing exclusions or higher premiums based on health status.
Allow broad access to health-savings accounts. There would be a one-time federal tax credit to encourage all Americans to open an HSA to pay routine medical bills. Families typically spend up to 22% less on healthcare after switching to an HSA.
Deregulate the market for medical services. Providers need freedom from regulation to provide packages of services better tailored to people’s needs. Such provider flexibility will further reduce costs through additional marketplace competition.
Conclusion. The major reason why our healthcare is so expensive is because we, as individuals, don’t have enough “skin in the game,” in the sense of paying for routine medical expenses directly out of our own pockets. The reforms outlines above would correct this very problem.