This Can Be America's Century
When Donald Trump promised 3% growth, all the media pundits and progressive economists laughed their heads off. It’s no longer possible, they asserted -- the new normal is less than 2%. Remember these same people promised that demographic changes guaranteed unending progressive governance and that Barack Obama’s trillion-dollar-plus “stimulus” was going boost the economy and create jobs. To that, Mr. Trump is still guffawing as he has his second scoop of ice cream.
Here’s the thing: all of America could have that second scoop as well.
Pessimist progressives underestimate the America the framers gifted the world. Remove the Obama-era restraints from the economy and it will come thundering back to lead the world just as it did last century.
Two things have always separated America from the pack: free markets and energy. Cheap reliable energy built America and our free-market system and relatively nonpunitive taxation made this nation the economic powerhouse that doughtily still stands today.
Three percent growth is still achievable in America. Rein in the economically damaging environmental overreach of the last administration and unleash the energy resources at America’s disposal while instituting tax reform and we might even see the 7% growth that the nation experienced under Ronald Reagan. It was inconceivable under Barack Obama and it would have been unattainable under Hillary Clinton. Under the leadership of Donald Trump, however, it is entirely possible.
Energy and the Environment
President Trump in a recent energy policy speech said that since he became president, “we [have] reduced the petroleum share of the trade deficit by 5 percent.” Oil and gas production has almost doubled in the last decade and that was under the previous administration’s crippling energy policies. This is largely due to oil and natural gas development on private lands made possible by hydraulic fracking and horizontal drilling.
Imagine what can be done under an administration that understands business and will set free the fossil-fuel industry. Even coal production is up this year by almost 15%. Exporting coal to China and India alone could save Old King Coal and coal mining jobs for decades at the very least.
President Trump told Europe in his speech in Poland, “We are committed to securing your access to alternate sources of energy, so Poland and its neighbors are never again held hostage to a single supplier of energy.” No longer will energy-barren Europe be held captive by the Russians to heat their homes and power their industry. With liquid natural gas (LNG) plants under construction to take advantage of America’s vast supplies of natural gas the nation could very well become the leading supplier of the fuel to Europe and Asia.
Exploiting America’s energy reserves could also provide trillions of dollars to the federal treasury through leases, taxes, and fees.
Environmentalists want to leave all that energy in the ground, forcing us to pay more and have less. They want no fossil fuel development ever. They don’t even like nuclear power, the only zero-carbon emission source of energy that is viable. In New York State, Governor Andrew Cuomo is closing the Indian Point Nuclear Power Plant (the main supplier of electricity to New York City) and replacing it with, well, nothing. It’s almost as if environmentalists want rolling blackouts and electricity prices three times what they are now. We don’t need AC or heat when we have our leaders to keep us warm and cool while we spend all our money charging our electric cars.
President Trump has restarted the Keystone XL pipeline and the Dakota Extension in addition to issuing a special permit for a new transnational pipeline to carry oil from Mexico into Texas.
Scott Pruitt at EPA in conjunction with the Department of the Army is proposing a rule to rescind the Waters of the United States (WOTUS) rule. This was an attempt at controlling all development in the nation by defining almost any body of water either in situ year-round or merely reoccurring as Waters of the United States.
In theory, this could define small streams and even big puddles as WOTUS and controllable by the EPA -- and thus, render unto the EPA control of all business and all development.
Everyone wants clean water; no one is pro-pollution, but WOTUS is nothing more than a naked attempt by bureaucrats at the EPA to abrogate property rights and control all development everywhere.
It’s the same reasoning behind declaring CO2 a dangerous pollutant -- control.
CO2 is essential for plant growth and while the premise that global increases will make the planet warmer is debatable, it is unassailable that increases will make the planet greener and be a boon to crop growth. Plants breathe in CO2 and expel oxygen; the main reason behind the explosion of crop growth in the latter half of the twentieth century was the increase of CO2. The earth’s population is 7.5 billion people. In a few years, it will be, 8 billion and a few years after that, 10 billion. All those people are going to need to eat. The EPA may have labeled CO2 a pollutant, but it is not a pollutant; CO2 is life. Legislatively that should be one of the goals for Republicans, rewrite the Clean Air Act of 1990 to remove CO2 as a pollutant.
In any case, while there is still much to be done, energy under President Trump is going to be a growth industry and cheap energy will help make this century an American century like the last one. If the nation continues in this new direction, concentrating on exporting coal and LNG as well as opening up our coasts and as much land as possible to oil exploration the United States could become the Saudi Arabia of the 21st century because it is also entirely feasible for America to become a leading oil exporter. Taken all together, that means jobs, jobs, jobs, as well as revenues for the treasury and prosperity for the nation.
To date, confidence is up and the economy is starting to awaken from a decade of economic malaise. Yet it is assuredly the result of the belief that a businessman would be a better steward of the economy than a community organizer. The stock market is booming because of similar expectations and recent proclamations from Janet Yellen, Chair of the U.S. Federal Reserve System that interest rates will not have to rise as fast as predicted because expectations of increasing inflation have not come to pass.
Tax reform for America is the “Holy Grail.” The United States tax code has not been significantly reformed since Reagan. Simplifying and codifying common sense reforms could give the economy the boost it needs to get it from the previous administration’s 1.5 % “new reality” growth to the 3% plus growth America has historically enjoyed.
- A reduction of the corporate tax rate from 39.1% to 15%
- Year one total expensing of equipment and capital purchases
- Special one-time 0% tax on repatriated monies currently held overseas and invested in America during a specified time period
- Reduction of the seven current tax brackets to two, 10% and 25%, as well as doubling the standard deduction
- The elimination of the Estate Tax
- Elimination of the deduction for state and local taxes, while keeping the charitable contributions and mortgage interest deductions
- Repeal of the Alternative Minimum Tax
The first four points merit further examination. Reducing corporate taxes from 39.1% to 15% will make the nation competitive with other countries and perhaps attract corporations to America, the world’s largest market.
Most businesses in America file under the Sub-Chapter S designation in order to escape double taxation. An S corporation is really a pass-through type of arrangement where the taxes on profits are paid by the principals according to their tax bracket (at the highest 39%). Tax reform is imperative to realize the potential of a free society. The maximum tax bracket must come down to 25% (15% would be better but probably politically impossible). This will be a blessing to small business, which is paradoxically defined as businesses with incomes below $100 million (if only we could all be that small).
Most importantly, institute a one-time 0% tax rate on money currently held by corporations overseas that is repatriated to America and invested during a specified period of time. America is alone among nations in that it has a global corporate tax system. This means the nation taxes U.S. corporations on total income, regardless of whether it is earned domestically or overseas but only when the money is repatriated. It is estimated that corporations are holding more than $2.5 trillion overseas.
This money is earned from business operations in other countries and is already taxed by those particular nations. It is after-tax income (albeit taxed by other countries). It’s held overseas instead of brought back to America to invest because America would then tax it at the corporate rate of 39.1%, after allowing foreign taxes paid to be deducted from income.
As an example, if a corporation earned $1.5 million in a foreign country and paid a half-million dollars in taxes to that country, the remaining $1 million after-tax money would be taxed in America at the rate of 39.1%. This would result in a tax liability of $391,000. Add in the $500,000 already paid, and that is an effective rate of 59.4%. When that is taken into account, anyone can understand why corporations hold money abroad.
Imagine the boost to the economy the investment of $2.5 trillion would be. In addition, this money would be invested by businessmen in what they think would earn a profit. Politicians spent the trillion-plus dollars of the American Recovery and Reinvestment Act of 2009 as a reward for political backers and unions. What would have happened had we taken that money and allowed businessmen to invest in things that would have turned a profit? Business surely could have done a better job than the politicians did.
Couple this with the full expensing of all new capital investment instead of requiring it be depreciated over a number of years and the nation just might be able to get that 7.83% growth rate America achieved in 1983 under Ronald Reagan.
Remember, they also told Reagan it couldn’t be done.