Here's something we mentioned often during the Obama years: Not a single year during his presidency did we see annualized economic growth of 3.0 percent. And the average of the full eight years was less than 2.0 percent.
I don't even have the words to describe how awful that is. Obama's partisan and media apologists tried to make a virtue of the fact that he had many consecutive months of some growth - but that wasn't the great thing they wanted you to think it was. It was like the way they treated job growth. You'd see a headline that said, "100,000 jobs created last month," and you'd think, hey, 100,000 is a lot. But if you understood the size of the labor force and the rate of population growth, you'd understand 100,000 was a terrible number.
And eight years of annualized growth averaging less than 2.0 percent is putrid. It's one of the reasons the national debt exploded so much under Obama, because we weren't generating enough wealth to maintain the type of tax base that would generate healthy revenue to the Treasury, especially to keep up with Obama's profligate spending.
The nation needs to sustain annualized growth of at least 3.0 percent to stabilize its fiscal condition. To really get back to serious prosperity, we need to be enacting policies designed to produce between 4.0 percent and 5.0 percent annualized growth. We had growth like that during much of the Reagan presidency because Reagan's policies prioritized private-sector growth over "income equality" or "deficit reduction." I believe in not only reducing but eliminating the deficit - and paying off the national debt in much quicker order than most envision - but the key to this to turbo-charge economic growth.
To that end, I present to you the apparent new leader of the supply-side economics movement, your president and mine . . . Donald Trump:
U.S. President Donald Trump will release a tax plan on Wednesday that proposes to sharply slash business taxes and steeply discount the rate on corporate profits brought back into the United States, officials said.
The blueprint, which also calls for the raising of standard deductions for individuals, is designed to be a guidepost for lawmakers in Congress, though it likely will fall short of the comprehensive restructuring long discussed by Republicans.
The media and the Beltway crowd will obsess over the supposed additions to the deficit
Treasury Secretary Steve Mnuchin, who is leading the Trump administration's effort to craft a tax package that can pass Congress, described the plan as the "the biggest tax cut" in U.S. history and said he hoped it would attract broad support.
"There's multiple ways of doing this and the president is determined that we will have tax reform," he said at a breakfast forum in Washington sponsored by The Hill news outlet.
Analysts did not expect the plan to include any proposals for raising new revenue, potentially adding billions of dollars to the federal deficit.
Specifically, Trump wants to cut the corporate tax from the current 35 percent - the highest of any country in the world - to 15 percent. He would also cut the tax on repatriated profits from 35 percent to 10 percent. The boss has been talking about this for all the years I've known him. American companies make a lot of money overseas, and the tax code incentivizes them to keep the money overseas by threatening to sock them with a 35 percent tax if they bring it home. That is one of the most counterproductive things imaginable, and Herman's long been an advocate of changing it.
Now we've got a like-minded soul in the White House.
The media and the Beltway crowd will obsess over the supposed additions to the deficit. For them, nothing is more important than seeing the federal government confiscate every possible dollar from the private sector so politicians can spend it. And as soon as you deny them a penny, they'll suddenly scream about the very same deficit they've running up at record levels for the past decade.
The Trump tax plan recognizes something these people either don't know or won't admit: Federal revenue doesn't track with tax rates. It tracks with the size of the Gross Domestic Product. If you look at it historically, you'll see that revenue to the Treasury is almost always right around 18-to-20 percent, regardless of the actual rate of taxation. That's because when you produce more wealth, you spur more activity and there is more going on that can be taxed.
The corporate tax is a perfect example of this. The business sector is the most productive sector of the economy. It's the one that does the most good with the capital it has at its disposal. Yet politicians see the corporate sector as a goldmine to raid, even as they turn around and complain about job growth and wage stagnation. More capital to invest in productivity means better, more plentiful, cheaper goods - and more people earning income making them. This will do much more for growth and federal revenues than a high corporate tax rate.
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Cutting tax rates is good policy. Cutting spending is good policy.
You can't ever convince a left-wing politician or most journalists of this because they simply don't want to believe it. They insist on pretending that a cut in a tax rate will result in an exactly equivalent cut in revenues, as if the change in that tax rate will cause absolutely nothing to happen with the otherwise confiscated capital. When supply-siders say tax rate cuts can pay for themselves through the economic activity they facilitate via that freed-up capital, they call this "voodoo economics." They either learned this from George H.W. Bush back when he was still running against Ronald Reagan, or from watching Ferris Bueller's Day Off. Either way, they're wrong.
Now, let's talk about spending and deficits. Yes, we absolutely should cut spending, balance the budget and pay off the debt. But we should do this not to "pay for" tax cuts, which don't need to be "paid for." We should do it because it's good policy. The federal government is too big, spends too much and tries to do too much. Making it smaller (I did not say getting rid of it entirely, libertarians . . . I am not your pal) would benefit the nation in all kinds of ways. It would make it possible for the government to do well what it needs to do well, and would bring other functions of government closer to the people by concentrating them at the state or local level - or just get rid of them entirely if they're really not needed. Which many of them are not.
So yes, I'm all about cutting spending. But I'm against the idea that you can't cut tax rates unless you're also cutting spending at the same time. Cutting tax rates is good policy. Full stop. Cutting spending is good policy. Full stop.
And in all this, the key is economic growth. It's good to see that Trump has embraced growth as the cornerstone of his economic policy. It's the right priority. The so-called "deficit hawks" in Congress will be the biggest problem in passing this. These are the people whose Beltway-centric view of the economy leaves them hopelessly incapable of understanding all this. The less influence these people have on the outcome of all this, the better.
But at least we finally have a president who not only puts growth at the top of his priority list, but seems to actually understand supply-side thinking. Without that, we're not getting anywhere.
