Could President Trump’s economic policies make Britain Great again?

Contrary to the predictions of almost every political commentator in the Western World, two months ago this weekend (8th November) Donald Trump secured the position as President Elect of the United States of America. Contrary to the predictions of those same pundits the American economy hasn’t collapsed, the international order hasn’t broken down, and, at the time of writing this column, the World has not come to an end.

The “Transition Team” working for a smooth transfer of power from President Obama to President Elect Trump has its challenges, as has had every Transition Team throughout America’s history that has needed to address what may seem like fundamental changes in policy on the economy, foreign affairs, welfare and law and order, to say nothing of international affairs and defence. But like most effective democracies, the institutions of Government in America are both robust and flexible which is why democracy remains the least worst option for effective government that the world has yet developed.

The Soviet Union collapsed because it could neither accept nor adapt to meet the demands for change of its people and its constituent nations. The collapse of the Berlin wall, that anti-democratic symbol of repression in November 1989, and the subsequent liberation of dozens of historically independent states from the cruel yoke of the Kremlin saw a resurgence of national pride, culture and economic activity that had been suffocated by the heavy hand of communism. America can, and will, rise to the challenges of the Trump era whatever the pundits say, because it still has a sense of national identity and a balance of powers between Presidency, Congress, the judiciary and the state governors and legislatures.

There are those who still claim that the Presidency was “stolen” from Hilary Clinton, who admittedly won millions more of the popular vote but not enough seats in the electoral college to secure the election. But, this column would simply observe that the result demonstrates either unprecedented good luck on the part of Donald Trump or, alternatively, shock horror, that he and his tactical advisors fought a brilliantly targeted election campaign winning the votes that mattered in the states that mattered, among the demographics that mattered. That augurs well for a future Trump Administration when the Presidential Inauguration Ceremony takes place on Friday 20th January.

If the British electoral system can see a new Prime Minister with completely different views to his or her predecessor moving in through the front doors of 10 Downing Street with a whole new team of advisors and policies, within 24 hours, whilst the former incumbent leaves walking office-less down the road, then the American system, which by the Inauguration will have had two and a half months to prepare itself, can surely cope with a change at the top.

That change will undoubtedly bring about change in some key policy areas. If it didn’t, there would be no point having Presidential elections. What is also clear is that President Obama’s time in office was a period of economic decline and a failure to play to the full America’s role as the world’s greatest and richest nation. One area ripe for change is in economic management and international trade.

Students of economics the world over will have heard of something called the “Laffer Curve”. At its simplest level, the Laffer Curve is a graph, a visual representation of numbers. The numbers in question are calculated and presented to show that somewhere between a tax rate of 0% and 100% there is a level of taxation which actually brings in the greatest revenue to the government doing the taxing.

It is an approach which Treasury models the world over look to as a guide, but with the purity of which politicians then meddle to “send messages” that they want to “target the rich” or “help the poorest” or, in the United Kingdom today, support the “Just About Managing”. In practice, although the Laffer Curve is a standard tool, its findings are seldom put directly into practice. But this column wonders whether perhaps they might be by a President Trump and his advisory team.

The most prominent promoter (if not technically the inventor) of the Laffer Curve is one of the world’s greatest economists, Professor Arthur Laffer. He was an economic advisor to President Ronald Reagan and a mastermind of many of Reagan’s successful economic policies, and he went on to vote for Bill Clinton in two Presidential elections because of the latter’s commitment to deregulated markets.

What Professor Laffer has recently observed is that, frankly, President Obama’s approach since taking office has made matters much worse, not better, for the American economy (and hence for global trends): high levels of taxation on the wealthy, failed trade initiatives, and counter-productive packages of economic “stimulus” which backfire. When politicians meddle with free markets too much in seeking to “help the poor” by “hurting the rich” (echoes of Corbynism?) then we tend to find that we end up with more people unemployed: the very problem that Iain Duncan Smith’s controversial, but successful, welfare reforms sought to address and which, against the background of growth in the British economy, created more jobs than the rest of the European Union put together. Artificially low interest rates also make it harder for working families to obtain mortgages and destroy the value of pensions and savings for the retired.

So, Laffer proffers some sensible advice to President Elect Trump. Slash the corporate tax from 35 per cent (the highest in the OECD) to just 15 per cent (the 3rd lowest); allow year one tax write-offs for capital purchases by businesses to encourage investment; repeal Obamacare and replace it with health care savings accounts; reduce personal tax rates; lift much of the over-burdensome regulation of the economy; and get fairer trade deals in place. These may not be policies which Trump espoused during the election campaign, but with the Republicans now controlling The Senate, the House of Representatives and the majority of the state Governors, we may yet see a collegiate Leadership returning to the Grand Old Party; giving Trump a wealth of political experience and sound advice upon which to draw.

It wouldn’t hurt our own Chancellor of the Exchequer, Philip Hammond MP, to watch carefully what President Trump actually does after 20th January, as opposed to what he said he would do prior to 8th November. As we leave the European Union, we will have opportunities aplenty of set our own economic course. If Britain becomes a low tax, entrepreneurial, globally trading economy, we really could make Britain Great again!

The article first appeared in The Catholic Universe of Friday 6th January 2017

Cllr Chris Whitehouse KCSG is Chairman of Westminster’s leading political consultancy, www.whitehouseconsulting.co.uk, Secretary of the Catholic Legislators’ Network, a Trustee of the Right To Life Charitable Trust, and a Member of the Isle of Wight Council (Cons. Newport West).

t: @CllrWhitehouse