Larry Kudlow was an economist in the Reagan Administration, so he’s seen a thing or two about how tax cuts and deregulation can spur economic growth. These were the lynchpins of the Reagan growth plan, and if you remember the 1980s at all (or have studied what happened at the time), you know that Reagan’s policies unleashed economic growth unparalleled before or since in the post-war era.
We haven’t seen growth like that since, but Kudlow believes the Trump tax and deregulation proposals should give us a minimum of 3.5 percent annualized growth. Implement this well and in all likelihood we’re likely looking at 4.0 percent growth or even better.
Now why is this? First, let’s understand what GDP measures. It measures productivity, specifically the value of all goods and services produced in the United States. One of the things that negatively affects productivity is when companies have to spend time and resources dealing with regulatory compliance. Not only do you have to hire compliance staff but often you have to pay lawyers and lobbyists to deal with these issues. And if you still mess up and fail to comply, fines and penalties can be steep.