Theory 2 Action Podcast
Theory 2 Action Podcast
MM#385--The Trump Economic Miracle
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What if the secret to revitalizing the American economy lies in policies from past administrations?
Unearth the powerful economic strategies of Donald Trump on our latest episode of the Theory to Action podcast. We'll uncover how the Tax Cuts and Jobs Act unleashed unexpected GDP growth, challenging traditional business cycle theories. Our discussion doesn't shy away from critiquing the economic stagnation seen in the presidencies of George W. Bush and Barack Obama, and it raises probing questions about the current economic leadership under Joe Biden. We argue that understanding these dynamics is crucial for achieving the sustained GDP growth necessary to tackle the daunting national debt.
Join us as we explore the ripple effects of Trump's regulatory reforms and tax cuts, which invigorated American competitiveness by slashing the corporate tax rate and encouraging investment. We also dive into the economic principle of the Laffer curve, addressing how optimal tax rates can boost government revenue without hindering economic activity. We'll further discuss the significant role of transitioning able-bodied individuals from welfare to work in bolstering labor force participation rates. This episode promises a thought-provoking journey through the corridors of economic policy and its real-world impacts, urging us to learn from past successes to forge a path toward future prosperity.
Key Points from this Episode:
• Insights from Donald Trump's foreword on economic success
• Overview of the U.S. economic landscape and historical growth patterns
• Goals for economic revival in Trump’s first 100 days
• Importance of deregulating the economy to stimulate growth
• Advocacy for making tax cuts permanent for economic competitiveness
• Discussion on welfare reforms and their impact on labor participation
• Concluding thoughts on the future of America’s economy and its potential resurgence
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Welcome to the Theory to Action podcast, where we examine the timeless treasures of wisdom from the great books in less time, to help you take action immediately and ultimately to create and lead a flourishing life. Now here's your host, david Kaiser.
Speaker 2:Hello, I'm David and welcome back to another Mojo Minute, as always. Let's begin with our quote from our book of the day. This book documents that in many ways, there were economic statistics that were historic. The entrenched rate of growth in the economy has been sub 2% from 2000 to 2016. My administration sustained an increase well above that. Furthermore, the pushing 3% growth of 2018 and 19 also occurred very late in an economic expansion, one dating from the recovery from the 2008 recession. Business cycle theory says that growth should fall so late in an expansion. Yet growth accelerated when we enacted my tax cuts. Before those tax cuts, the United States had been lagging Europe after it sported a higher rate of growth. And if those accomplishments aren't enough, my Tax Cuts and Jobs Act actually paid for itself as revenues soared thanks to higher growth and more workers working than ever before.
Speaker 2:Critics, put that in your pipe and smoke it. This book belongs to Art Laffer and Steve Moore. I can't endorse all the ideas and proposals in the book as my own platform, but the policies espoused by Art and Steve have been, and continue to be, my guiding light when making economic policy decisions, and that quote comes to us from one, donald J Trump, in the foreword to the book the Trump Economic Miracle and the Plan to Unleash Prosperity Again and the plan to unleash prosperity again Again, written by Art Laffer and Stephen Moore, two of my favorite economists. Both of them are supply-side economists and two of the most proven people on how to get an economy roaring again, which is exactly what we need. In case you missed it, we had a classic Trumpism included in that quote. We want to make sure you do not miss it. Quote critics put that in your pipe and smoke it. End of quote. Classic Trump being well Trump, yes, as we did in our podcast earlier this week. The number one goal, no matter what, for Donald Trump in these first four to six or rather four to six months, is for Trump to get the economy engine humming again. Trump is right on the quote above.
Speaker 2:The US hasn't had consistent economic growth above 2% of GDP since before the year 2000. Outside of a little blip on Trump's economic policies in 2008 and 2009, did we as a country crest slightly above the 3% mark, which was extraordinary, but then came COVID and then everything stopped. Now think about that, folks. The US economy, as big as it is, has not grown above 3% GDP since before the Bush 43 presidency. Now, as a quick aside, I did in fact ask a professional economist this question back in 2023 at a business conference. I asked her on stage she was taking questions and she answered with the humdrum, standard, pat answer that most economies give or most economists give. You can check out our podcast Liberty Minute 24, for the correct answer she should have given, but I'm sure the firm she works for and her political bias did not allow her to look at the facts objectively. We'll put a link in the show notes to Liberty Minute 24. But back to get the economy going again. Facts objectively. We'll put a link in the show notes to Liberty Minute 24. But back to get the economy going again.
Speaker 2:So for all of George Bush's presidency George W Bush the economy never sustained more than 3% growth for longer than two quarters. And then for all of Barack Obama's presidency, the same thing. We had the hiccup with COVID-19 during Trump's presidency. So, for all intents and purposes, we will start calling the Biden presidency the last four years. But let's be real, as the kids say it these days, let's keep it real. Joe Biden was MIA for all of those four years. We can call it the Biden presidency, but I'm going to start referring to the last four years as the missing Biden presidency, because who knows who has been running the country? We heard that from the reporting of the New York Times and the Wall Street Journal, and now I just heard a Washington Post had a similar story. I have not read that one yet, but it's probably going to be just as bonkers and holy smokes. How did we even get in this position, other than the propaganda press carried the water for Joe Biden for four years? But we will wait. We will hopefully wait for the books to be written, and hopefully they'll be written soon so we can review them.
Speaker 2:But as for the future, donald Trump's number one goal in his first 100 days is to do anything and everything to get the economy roaring again. Four points here we need three to four percent GDP growth year over year. We need them sustained, quarter by quarter, year over year. We can't have any more blips of 3% growth one quarter and then negative 1% growth the next quarter. Can't have 3% growth one year followed by negative 1% growth the next year. One year followed by negative 1% growth the next year. We need to sustain this and begin stacking, quarter after quarter, year after year of sustained growth. We have to average in the next four years at least 3% growth as a minimum, because our debt is so bad and we have so much stacking up in terms of interest and deficit that we have to grow, and we got to grow fast. All of that said, the next logical question is okay, great, but how do we do this Now? I've answered this question repeatedly on this podcast, but here it is again. To grow the economy 3% to 4% is the same way you grow an economy 3% to 4% in the past. So if you go back and study history, you will see that real growth rates over the past 100 years happened three times. Years happened three times Calvin Coolidge in the roaring 20s after Harding. Jfk got the economy roaring in the 60s before he was assassinated. And Ronald Reagan got the economy roaring in the 1980s with the 1982 tax cut.
Speaker 2:Two books I would point you to that I have mentioned here before. Two books I would point you to that I have mentioned here before and I'll keep mentioning until people said they have read them, and that is Taxes have Consequences by Art Laffer and the JFK Revolution by Larry Kudlow, and actually we're going to recommend a third, the one that we covered today, the Trump Economic Miracle. This can and should be your roadmap these three books to follow what Donald Trump will do over his next 100 days in terms of the economy. In chapter six of this book, laffer and Moore outline 17 policies and principles and how they will translate into real world solutions. Of the 17, we're not going to cover them all, even though we should. We're only going to cover three, because two of these three needs to be done in the first 100 days. In fact, if we're really up against it, only one of these needs to be done, but it needs to be done by Memorial Day or, at the latest, by July 4th. So the first of these principles.
Speaker 2:Going back to the book Number one, slash job killing and costly regulations. The regulatory state is a two trillion tax on the American economy. We all want worker safety, a clean environment and consumer protections, but in too many cases the cost of regulations far outweigh the societal benefits. Rolling back unnecessarily burdensome regulations means lower cost to businesses and consumers. As we described in Chapter 2, the regulatory beast has become one of the greatest deterrents to investment here in America and a faster pace of job creation, and the Trump administration eliminated eight regulations for every one they added. The economic impact of the Trump deregulation agenda was enormous, putting an extra $3,100 into the pocket of the average American household each year. How crazy is that? $3,100 in real money back into the pockets of the average American household each year that's called getting it done. Let's go back to the book for number two.
Speaker 2:Principle number two Make the tax cut permanent. Lower tax rates, as JFK, reagan and others have proven throughout history, leads to more growth, more investment and more jobs. Trump always saw this through the lens of American competitiveness Quote we have put our businesses in the deep hole. I want us to have the tax advantage and for America to go from the worst to the first on tax competitiveness. That was what he signed into law. That is why he signed into law a $3.2 trillion tax relief measure. It meant that a typical family of four earning $75,000 a year saw their tax bill fall by half, a benefit valued at more than $2,000., and the corporate tax rate fell from 35% the highest in the world to 21%. Trump has promised to make all of those tax cuts permanent. Why? Because they worked almost exactly how we anticipated they would work. Capital brought between $1 and $2 trillion back to the shores US shores where it was reinvested in American startup businesses, jobs and factories. The Trump tax cuts also led to the rich paying more taxes as a share of all taxes paid, not less. That has been the case with every major tax cut of the last 40 years and if you get the book you will see a wonderful graph going all the way back to the 1980s for Reagan's tax cut and how that was implemented, 80s for Reagan's tax cut and how that was implemented. And in fact, that last point on principle number two is the economic principle known as the Laffer curve.
Speaker 2:Now, not to get in the weeds about this stuff, but here is the Laffer curve in a nutshell. The curve merely illustrates the relationship between tax rates and the amount of tax revenue collected by governments. It was developed by the economist Arthur Laffer in 1974. The curve is represented by a bell-shaped graph that shows how tax rate or how tax revenue changes as tax rates increase or decrease. Now the key concepts. There's only three of them For the Laffer curve the relationship between tax cuts and tax revenue. The curve indicates that there's an optimal tax rate that maximizes government revenue. So on a bell curve you have the extremes. At both 0% tax rate and 100% tax rate, the government collects no revenue. Revenue maximization happens somewhere between these extremes and that is a perfect tax rate that generates the maximum amount of revenue without suffering the debilitating cost of taxes.
Speaker 2:Now the Laffer curve is based on two effects. The arithmetic effect as tax rates increase, the government collects more revenue per dollar of the tax base. But the economic effect is that higher tax rates can and does indeed discourage economic activity, which potentially then shrinks the tax base, because people will always avoid taxes. If they can or if it's too aggressive, they simply hide it, store it, ship it off out of the United States, and they will always do that. There's no way you can confiscate 100% of people's taxes. We have 100 years of data trying to do that and there will always be ways to hide in offshore taxes. Now the implications of all this is that tax policy the curve, the Laffer curve proves that increasing tax rates beyond a certain point is counterproductive for raising the government revenue. So high tax rates do in fact disincentivize work, investment and production.
Speaker 2:And as tax rates increase, people seek more ways to avoid and evade taxes, like we just talked about Now as a total aside if you want to get in the weeds on this stuff. It's kind of a nerdy book but, like the book I mentioned before, taxes have consequences. This gets into the 100 million ways that people will seek and avoid paying taxes every time you increase tax rates. And no government, no government, will ever be able to enforce 100% tax compliance. Why? Because this has been done since the dawn of time. No matter how you collect the taxes, they will find ways to shelter them. They'll put them in bonds. They will do things legally, they'll do things illegally. So the best way for government to collect taxes is to find the real effective rate to run good government, and that is to lower the tax rates to the optimal level, roughly between 15 and 21 percent. Because at 15 to 21 percent we find that 90 to 95 percent of the hiding of money goes away, plain and simple. So people don't mind paying 15 to 21 percent taxes. But when you try to take 77 percent of people's taxes, like they try to do during FDR's time, you just keep a Great Depression becoming and even increasing to a further Great Depression. And again we have over 100 years of data that proves all of this.
Speaker 2:You could read the book and for me, I thought it was frankly fascinating. Okay, so we talked about two of the three principles. So far, we got to cut the regs. Hopefully the Doge Brothers whatever's going on there can help us with this specific point as the weeks and months progress, and we need to make the 2017 tax cuts permanent. Point number three, going back to the book.
Speaker 2:Third principle replace welfare with work. Growth will require more able-bodied Americans getting off welfare and into jobs. Although the labor pool is aging, we are also seeing people who could be working better staying home. The labor force participation rate in March 2024 was just about 62.7%. That's down from 66% 20 years earlier. There are complex reasons for this, but a key indicator is that welfare payments can often exceed in generosity the take-home pay for most starter jobs starter jobs and this isn't fair to those who do work for low wages and for taxpayers and for long-term economic mobility of those who could be working. Welfare, which includes cash assistance, public housing, food stamps, disability payments, unemployment benefits and Medicaid, needs to be a hand up, not a hand out. While many leftist sociologists and other academic uh, academic additions may disagree with this philosophy, the good news is that most Americans of both parties agree with the Trump position and, frankly, stopping a wide open Southern border and removing illegal immigrants will help this principle as well. Now just one last quote from our roadmap of the book.
Speaker 2:Going back to the book the trump economic miracle by art laffer and stephen moore, on the big picture priorities, the major reforms that need to be made to our government, and it was our belief in 2016, and remains so today, that Trump had the right political and economic take on what ails America and how to fix things. Trumponomics was the right game plan and Trump was the right man to sell it. Trumponomics was the right game plan and Trump was the right man to sell it. History is about to repeat itself when Trump returns to the Oval Office in January of 2025. Our bet is that prosperity will make a grand comeback and America will experience.
Speaker 2:To borrow a phrase from John F Kennedy, a rising tide of prosperity lifts all boats. Yes, indeed, it does. Don't let anyone tell you or convince you otherwise. And if you read all three of these books, you'll be convinced, just like me, that this is the way of how to grow an economy. So in today's Mojo Minute, trump's first three years saw continued economic expansion, low unemployment and a strong stock market performance. However, the COVID-19 pandemic in trade policies marked a shift from the economic strategies of recent administrations, both Republican and Democrat, and that shift was the right approach. And with the GOP Congress that does their job and makes the tax cuts permanent before Memorial Day or July 4th, america's future will look bright again and it will be morning in America again. Let's pray so, as always, keep fighting the good fight.
Speaker 1:Thank you for joining us. We hope you enjoyed this Theory to Action podcast. Be sure to check out our show page at team mojo academycom, where we have everything we discussed in this podcast, as well as other great resources. Until next time, keep getting your mojo on. Thank you.