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Good execution should push it to 4.0 percent or better

Larry Kudlow: Trump deregulation and tax cuts should give us a minimum of 3.5 percent growth



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.

Regulatory assaults on American business reached a fever pitch under the Obama Administration

And even if you’re in total compliance, the things you had to do to get there usually limit your capacity to do what you’re actually in business to do. All told, this amounts to a huge drag on productivity. And the regulatory assaults on American business reached a fever pitch under the Obama Administration, which apparently believed it could never impose enough burdens on business. That helps explain why we averaged only about 2.0 percent GDP growth during Obama’s presidency, and why he was the first postwar president not to achieve a single year of 3.0 percent growth. Not a single year! And he had eight tries. I am sure Larry Kudlow is right that aggressive deregulation can kick-start growth in a way we haven’t seen since Reagan roamed the halls of the White House. He had not been a businessman like Donald Trump, but he appreciated business and understood that it, not government, was the engine of American growth. But there is no reason to stop there. We should cut both the corporate and individual tax rates, but I would start by cutting the corporate tax from the current highest-in-the-world rate of 35 percent to 15 percent, and be sure to reduce or eliminate the tax on repatriated profits. This will remove huge disincentives to productivity, and free up a windfall of capital for businesses to invest in their further growth.

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Cut individual income tax rates so consumers have more cash to spend

Then, for those who like to focus on the demand side, cut individual income tax rates so consumers have more cash to spend buying all those products being produced. Democrats and the media, who don’t understand how tax and regulatory policy affect other behavior, will scream that this will explode the deficit. You know what makes the deficit such a big problem? Slow growth, which keeps the tax base from expanding. That’s why we added so much debt during the Obama years. Obama was more concerned with spending federal dollars and beating up business. The result of that was slow growth and an additional $10 trillion in debt. I’m ready to try Trump’s approach. And Larry Kudlow, who’s seen something like it work before, gives us every reason to be confident about where it can take us.


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