The U.S. Department of Labor reported earlier this month that the U.S. economy continued to gain steam, with over 228,000 jobs created and unemployment remaining at a historic 17-year low of 4.1 percent.
On top of a gain of almost 2 million new jobs and over 5,000 points in the Dow Jones since the 2016 election, the economy looks to be roaring in a state unseen in decades and in sharp contrast to the slow recovery of the Obama years.
As someone who has worked extensively in economics and financial markets, I know how developments in the economy are often characterized for political reasons no matter the underlying secular trends pushing them.
After all, the real drivers of hiring, growth, and value-creation are the entrepreneurs, innovators, small-business owners, investors, and workers, not politicians or government.
However government can slow economic activity through overly restrictive regulations as well as spur it through targeted market-stabilizing efforts.
The Trump Administration and GOP Congress, by all counts, have so far supported a pro-growth approach to legislation as well as regulation that has certainly boosted our economic growth drastically.
On the legislative front, at last it looks like Congress’ tax reform bill has been relatively finalized, with minor differences to be ironed out in conference, and will deliver much-needed tax cuts to businesses.
By reducing corporate taxes, businesses will be able to reinvest their money at this very opportune time for our economy as technological progress in multiple sectors begins to accelerate, ranging from Internet services to aeronautical to biotechnology and much more.
Undoubtedly, Americans will soon see the benefits of this in better and more innovative products and services, as well as a rising tide of jobs and wages.
On the individual front, there indeed remain systematic economic problems that are difficult to fix. Median wage growth seems to have permanently stalled, which I believe is an indicator already of the upcoming automation revolution in our economy that will create a far more bifurcated income structure.
By reducing the tax burden on ordinary Americans and simplifying the tax code, the tax reform bill at least relieves some of the upcoming inevitable economic difficulties for regular Americans. These upcoming economic disruptive transformations won’t be able to be solved by mere tax policy, but it’s a start.
On the regulatory front, President Trump and his administration has had a far lower profile but perhaps even more important impact on innovation and growth.
Given the amount of economic regulatory power currently imbued in our apparatus of federal agencies, a lot of the actual regulations that affect the day-to-day work of businesses, and their bottom line, in fact happens at these administrative agencies.
While each of these regulations addresses an extremely technocratic aspect of an industry, in totality these regulations often have had the effect of slowing growth by increasing compliance costs on businesses and preventing businesses from pursuing certain contracts, products, investments, and other actions.
Furthermore, many Obama-era regulations had a “chilling effect” on many kinds of business activities and investment due to a company not wanting to risk their action attracting costly regulatory attention.
Despite the media-focus last year on all sorts of other issues, voters in the end by far focused on the economy, as has been typical for the past decade. The overwhelming majority of Americans still felt pessimistic about the economy, albeit less than in previous years, despite the 2016 unemployment rate of 5 percent and continuing stock market growth.
President Trump and the Republican Congress are effectively delivering on the economic demands of voters last year at the ballot box. Indeed there is only so much government can do and there are upcoming complex structural economic issues that will require more creative solutions. However Republicans in DC are pursuing the right path at this point in time in encouraging business investment and innovation that fuels a rising tide for all Americans.