Needed: More New Jobs, Higher Incomes and Trillions in Additional Tax Revenues

Editor's Note

Economic growth. It's a hot topic these days—in books, in articles, and in corporate America.

What's the best way to reduce the deficit and the accumulated public debt? What's the best way to reignite economic growth?

Many analysts and journalists have not done due diligence in analyzing the complete Clinton and Trump economic plans.

As our preceding articles on economic policy issues have explained and illustrated, pro-growth tax reductions coupled with permanent cost-cutting (eliminating result-less government activities and programs) is a sure-fire to make America grow again.

Indeed, we are very much in favor of keeping Social Security and Medicare (and other entitlement programs) completely intact. 

But to accomplish that goal, government tax revenues must significantly increase and the accumulated public debt must be drastically reduced.

This article outlines a realistic way to accomplish these goals.

Many of the concepts found in this article were originally discussed in an article Stephen Moore wrote with Andy Puzder in The Wall Street Journal, A Trump Economy Beats Clinton’s.

Introduction

The differing economic philosophies of Donald Trump and Hillary Clinton can be summarized in one sentence: Trump wants to cut taxes to grow the economy, while Clinton wants to raise taxes to grow the government.

Clinton has vowed to defend President Obama’s “legacy” and double down on job-killers like Obamacare. 

Even Bill Clinton knows that Obamacare is a wreck—he’s acknowledged the costs are spiraling out of control. This year's 25% premium hikes are only the start of a cascade of higher health care costs.

Since the end of the recession, economic growth has averaged an anemic 2.1%, producing the weakest “recovery” since the Great Depression.

Over the past year that has slowed to 1.5%. That’s barely staying out of recession.

The middle class is shrinking, and median household income, in real terms, is lower today than before the recession began.

For the first six months of 2016, incomes have begun to fall again. Almost three-in-four Americans agree that we need a change of direction. 

That isn't going to happen under Clinton unless she suddenly pivots rather than perseveres with ill-advised economic policies. And that seems unlikely.

What Donald Trump Proposes

Trump is offering big changes, and I believe they could accelerate the economic growth rate from 1.5% to 4% for the next five years.

That is the equivalent of adding another Texas to the U.S. economy. 

First, Trump will enact the biggest pro-growth tax cut since Ronald Reagan’s 1981 reform. 

Trump would simplify the tax code and significantly reduce marginal rates, encouraging investment and economic expansion. 

His proposed corporate tax rate of 15% would make it easier for American firms to repatriate earnings, bringing capital home and making the U.S. a more hospitable place to invest.

Small business would have the 15% tax rate too, and there are 26 million of these firms.

Don’t believe the phony claim and it will cost $10 or $20 trillion. Growth will cause revenues to increase, not decrease.  

Abandonment of the Unproductive and Obsolete

It's true: Implementing a real plan to accomplish permanent cost-cutting with respect to outgrown, outworn, and obsolete government activities and programs could cut trillions of dollars from the deficit.

Simply put, abandonment of the things that do not work and the things that have never worked will go a long way in turning around government, that is, creating new government performance capacity.

Take, for example, Obamacare, the fastest-growing entitlement program of all time.

We propose it be replaced with a consumer-choice health plan. This will cut costs for families and businesses.

Cutting Back or Eliminating Government Regulations and Government Controls of Economic Activity

On the regulatory front, Trump wants to immediately repeal dozens of President Obama’s anti-business executive orders.

Let's start with the clean power plant law that has put tens of thousands of our coal miners out of work. 

A pro-growth energy policy would mean developing all of America’s abundant resources—oil, natural gas, and coal.

His plan could make America the world’s No. 1 energy producer within five years, creating millions of new jobs and trillions of dollars in extra output—along with new royalty payments to the government.

On immigration, Trump will build a wall to keep out illegal immigrants. But he wants that wall to have wide gates for legal immigrants to come and benefit our country. We can't fix our legal immigration system until the border is secured. 

I am for trade and don't always agree with Trump on this issue. But he is right that China is stealing and cheating in our trade arrangements.  That must stop.

The U.S. needs trade. Yet it also must have a president willing to negotiate from a position of strength with countries that manipulate their currencies, steal Americans’ intellectual property, or compel companies to disclose trade secrets as a condition of entering their markets.

Negotiating better trade deals and enforcing the current ones would help the U.S. economy. 

In Conclusion

Just having someone in the White House who knows how to run a business, meet a payroll, and pay the bills would be such a vast improvement over the political class that has so weakened America's standing in the world.

Without much faster growth of the economy, America will not retain our world super power status. 

China will surpass us and laugh all the way. It is time to take American competitiveness seriously and fight to win economically.

A resurgence of American prosperity will benefit our citizens and show the rest of the world how to grow out of the worldwide malaise that has stalled prosperity everywhere. 

Stephen Moore is a Senior Economic Advisor to the Trump campaign and an economist with Freedom Works.