Can Trump do it?
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Following his negotiated deal to retain 1,100 jobs with Carrier Corporation in Indiana, President-elect Donald Trump last week held the fist of a series of Victory Rallies in Cincinnati, Ohio. This was his way of thanking the American people for their support in the election, particularly in key battle-ground states.
During his speech he mentioned three things for jump-starting the economy. None of this was new as it was mentioned on the campaign trail, but by repeating it now he is giving us a glimpse into the near future, which Republicans and Independents will like, maybe even a few Democrats as well.
First, he mentioned he would lower the corporate tax from 35% (the world's highest) to 15%. Such a reduction will encourage growth in the economy and cause American companies to stay here or to return to our shores. Consider this, in 2001 Canada's corporate tax rate was a whopping 40.5%, which was lowered to 27.5% in 2011, thereby allowing them to escape the recession and resulted in boom times for the country. It is no coincidence that Canada’s drop in unemployment (from a high of 8.7% in 2009 to 7.2% as of March 2012) parallels a decline in the corporate tax rates for the same period (from 31.02% to 27.6%). Likewise, German manufacturing has grown and surpassed the United States as the #2 exporter in the world (behind China at #1) thanks to a reduction in their corporate tax rate. It should therefore come as no surprise that Japan finally followed suit in an attempt to unshackle business and encourage commerce, going from 40.9% in 2001 to 34.5% in 2012.
As these other countries have come to realize, the world is a competitive place and you cannot succeed by taxing people and companies to excess. In fact, their message is simple: unshackle them from the tax burden and stand out of their way.
Liberal Democrats, on the other hand, believe a high corporate tax rate is needed to pay for their entitlement programs. What they do not seem to realize, if our Gross Domestic Product (GDP) is allowed to accelerate, there will be more money coming into the system.
Second, Mr. Trump promised to reduce the rules and regulations stiffling business growth.
In November 2012, CNSNews reported an average of 68 new regulations were being introduced on a daily basis by various government agencies. This was based on a study of the government's Regulations.gov website which allows visitors to find and comment on proposed regulations and related documents published by the federal government. This means, approximately 25,000 new rules and regulations are being issued each year, a staggering number by anyone's estimation. This means business, which is responsible for generating capital to fuel the economy is being kept on a very short leash, one that thwarts growth and expansion.
Why so many rules? One cannot help but wonder if it’s to protect consumers or to justify the existence of government. Frankly, I think it is a prime example of "Parkinson’s Law" whereby "work expands so as to fill the time available for its completion," hence the need for government bureaucracy.
The Democrats will likely try to block removing regulations as they believe the only way to control business (and people) is through legislation.
Third, Mr. Trump repeated the need for us to seek energy independence, which is music to my ears.
Trump's declaration is reminiscent of 1962, when President Kennedy challenged the country to put a man on the moon by the end of the decade, and by doing so established a national objective for us to aspire to. We met that goal and won the space race. In the process, we created new technologies, industries, jobs, and promoted education in the process. Basically, it reinvigorated the country, bringing us out of the doldrums, and created a boom-time in business. It was a win-win scenario all around, but that was then, this is now.
It appears Mr. Trump is learning from Kennedy's challenge and establishing a new goal. Perhaps it should be underwater research, fix the national infrastructure, or devise a new rapid transit system. To Trump, the logical choice should be to establish energy independence as our national priority, thereby freeing us from Middle Eastern entanglements and economic extortion.
Such a national goal would invigorate education, particularly in the areas of geology, engineering, and mathematics. New technologies would inevitably be devised to access and cultivate energy resources. We already know there are huge reserves of untapped oil, gas, and coal in this country which we should capitalize on. Beyond this, there is the prospect of nuclear, wind, solar, and oceanic energies which we should continue to pursue. Whoever masters the energy resources of the world commands their own destiny. Currently though, we are forced to dance to somebody else's fiddle which does not bode well for our economic well-being.
4.3 billion barrels of oil have been discovered in Montana and North Dakota, easily dwarfing oil production in the Middle East. We are also sitting on a huge gas field in Pennsylvania, Eastern Ohio, and Western New York. And let us not forget the other billions of barrels of oil in Alaska and off our shores. Such resources offer a golden opportunity to relieve our economic plight as exemplified by the current oil rush in North Dakota and Montana where jobs are aplenty.
The challenge, of course, is extracting the energy without harming our environment, which is why we need a national challenge to meet our demand without hurting ourselves. Like Kennedy, this requires presidential leadership which Mr. Trump is willing to provide. The benefits are simply too numerous to overlook. A national energy objective would put the country back to work, promote education, research and development of technology, and free us from foreign entanglements which have plagued us for years.
Mr. Trump's statement of our national resolve could work wonders for us right now. It would give us a sense of direction and hope. There are countries who command gold reserves, diamonds and minerals, etc. Frankly, I'll settle for being the energy merchant of the world. Everybody else will be forced to fall in line behind us.
These three objectives, reducing the corporate tax, reducing regulations, and creating energy independence, will have an outstanding effect on our GDP and create an inordinate number of jobs. It is not based on accounting tricks or juggling numbers, but common sense instead.
Between last week's Carrier deal and these three points from his Cincinnati speech, I am seeing signs of hope in the country. I have already met many people who voted against the President-elect, but are now willing to embrace him if he can do half of what he promised, such as jump-starting the economy.
The first six month's of Mr. Trump's administration is going to be interesting. If he can deliver on his promises, he will easily win a second term, which is another reason why the Democrats will fight him.
Will he be able to deliver on all of his promises? We'll find out soon enough. I know this, you have to start somewhere and as one of our Bryce's laws contends, "You eat elephants one spoonful at a time."
Keep the Faith!
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Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 40 years of experience in the management consulting field. He can be reached at email@example.com
For Tim’s columns, see: timbryce.com
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Copyright © 2016 by Tim Bryce. All rights reserved.