If the Trump administration has one overarching goal, it’s to Make America Great Again. But what does this mean? It means we are promoting MAGAnomics—and that means sustained 3% economic growth.
For most of our nation’s modern history, a healthy American economy meant one that grew at roughly 3.5%. That was the average growth rate between the late 1940s and 2007. Since then, it has hardly topped 2%.
The difference between those two growth rates is staggering. If the American economy had grown at only 2% between the end of World War II and 2000, average household income would have been roughly $26,000 instead of $50,000.
Over the next 10 years, 3% growth instead of 2% will yield a nominal gross domestic product that is $16 trillion larger, federal government revenues $2.9 trillion greater, and wages and salaries of American workers $7 trillion higher.
For merely suggesting that we can get back to that level, the administration has been criticized as unrealistic. That’s fine with us. We heard the same pessimism 40 years ago, when the country was mired in “stagflation” and “malaise.” But Ronald Reagan dared to challenge that thinking and steered us to a boom that many people thought unachievable. In the 7½ years following the end of the recession in 1982, real GDP grew at an annual rate of 4.4%. That is what a recovery looks like, and what the American economy is still capable of achieving.
The focus of MAGAnomics is simple: Grow the economy and with it the wealth of, and opportunity for, all Americans. It does that by focusing on fundamental principles that made the U.S. economy the greatest engine of prosperity in the history of the planet:
• Tax reform. We need to boost productivity. Fundamental to that is encouraging capital investment. We’ve seen for decades that growth in private-sector jobs correlates to growth in private business investment. When businesses invest in new plants and equipment, they tend to hire more people, who produce more. Lower tax rates and faster cost recovery are two levers that will reduce the cost of capital and thereby help ignite economic growth. And since 70% of business income goes to wages, the benefits flow to workers as well.
• Curbing unnecessary regulation. Much like commonsense tax reform, rolling back unnecessarily burdensome regulations will reduce the cost of doing business. When regulations increase costs, they decrease returns, leaving less capital to invest. If they are too burdensome, they discourage any investment at all, as businesses choose to forgo opportunities. This is important to all business, but especially to capital-intensive sectors like manufacturing. Overly zealous environmental regulations have played a role in pushing many U.S. businesses overseas. Requiring realistic and fact-based cost-benefit analyses of regulations will help protect both the environment and American jobs.
• Welfare reform. Growth also depends on the size of the workforce. Although the labor pool is aging, we are also seeing people who could be working but are staying home. We badly need them to go back to work. We believe that most want to do this but simply lack the opportunity. Our welfare system often creates disincentives for people to seek work. We intend to change that. We need to reform welfare to ensure it helps those truly in need of it, but does not encourage people to stay home.
• Smart energy strategy. The president’s “all of the above” energy strategy expands the economy’s growth potential. Yes, it puts coal miners back to work. But cheaper, cleaner, more abundant energy will also increase investment and employment across dozens of industries, from chemicals to automobiles. By ensuring reliable supplies and stable prices, the president’s energy plan will reduce uncertainty, especially in the manufacturing sector, thereby reducing the risks associated with building new plants and hiring more American workers.
• Rebuilding America’s infrastructure. The president’s plan to rebuild America’s infrastructure will create immediate job opportunities. More important, it will boost the long-term productivity of American industry. Rebuilding roads, bridges, airports and ports will pay dividends both now and in the future.
• Fair trade for America. The president is right in that the U.S. is frequently abused when it comes to international trade. Ensuring that other nations do not undermine our economy by unduly taxing our products, by dumping products here, or by stealing our intellectual property is essential to our economic future.
• Government spending restraint. When government spends a lot, it takes money away from private investment. And private investment is always a more efficient allocator of capital than government. We will continue to fund critical government functions, including a social safety net that gives people the comfort of knowing they will not be overlooked while encouraging them to be more willing to take chances. But we will watch every dollar to minimize waste. We will, in short, seek to take from you only what government actually needs to function.
MAGAnomics is for everyone, but especially for those who left for work this morning in the dark but came home after their kids were asleep. It’s for those who are working part-time but praying for a full-time job. It’s for folks whose savings are as exhausted as they are. This president hears you. He knows America’s greatness doesn’t spring from higher taxes or unnecessary regulations or broken welfare programs. It doesn’t come from government at all. It comes from you.
If we enact the president’s broad agenda—if MAGAnomics is allowed to work—we will have set the stage for the greatest revival of the American economy since the early 1980s. It will remind people—including those who have forgotten, or those who don’t want you to remember—what a great America means. That is driving everything we do.
Mr. Mulvaney is director of the Office of Management and Budget.