Here Comes Trump’s ‘Morning in America’ Economy

With the landslide victory in the presidential race, Donald J. Trump will be sworn in as America’s 47th President on January 20, 2025. After that, Trump will implement economic policies that eventually be viewed as a new “Morning in America.” These are his policies.

Lower Income Taxes

Trump wants to keep tax rates as low as possible for all Americans. He also wants to ensure that tax policy provides incentives. To accomplish these goals, he will extend the Trump tax cuts passed in 2017 which lowered taxes for all Americans by 10%, except those who live in areas where state and local taxes are ridiculously high.

Lower tax rates mean workers will keep more of what they earn, which is an incentive to work harder and earn more. He will also remove income taxes on overtime pay incentivizing workers to take overtime work when available.

He will help lower-income service workers by not taxing tips. And he will not tax Social Security recipient’s payments.

Lower Energy Prices

Trump will vastly increase the production of domestic energy by approving the Keystone Pipeline, allowing drilling on federal lands and making the permitting process much easier. This increase in supply will result in much lower energy prices. Trump says he can cut energy prices by 50% within one year.

Smaller Government Budget Deficits

His lower tax rates will increase the U.S. gross domestic product (GDP) and increase taxable income. That means tax revenues will increase, just like they did after the 2017 tax cuts. He will reduce government spending by bringing in Elon Musk, an extremely intelligent and experienced cost-cutter, to reduce wasteful and unnecessary government spending. The goal will be to eventually work toward a balanced budget.

Lower Inflation

The combination of lower energy prices and a significant reduction in government spending which will eliminate excess demand, will result in much lower inflation. When Trump left office in January 2021, the annual inflation rate was 1.4%. He wants to reach that level again.

Lower Interest Rates

The lower inflation will result in monetary policy that significantly reduces interest rates. Although he is stuck with the mistake prone Jerome Powell as Fed chair until February 2026, he will jawbone the Fed until Powell can be replaced by a chair who will respond appropriately to economic conditions.

The reduced federal budget deficit will reduce borrowing demand in capital markets, putting downward pressure on interest rates. Trump will also keep tax rates low for individuals and corporations that create capital thereby increasing the supply of funds to capital markets, further putting downward pressure on interest rates.

Higher Economic Growth

Trump’s fiscal policy actions, lower tax rates and lower government spending will lead to an increase in the growth rate of GDP. Trump will also reduce or eliminate counter-productive regulations that tend to limit economic growth. These actions will provide more opportunity for all Americans. Those Americans who are well prepared will see tremendous growth opportunities.

Lower Housing Costs

Trump will move to increase the supply of houses by allowing homes to be built on idle government land. He will also reduce regulations to make it easier and less costly to build new homes. The increase in the supply of new homes will put downward pressure on the price.

Tariffs

While free market economists, like me, generally favor no tariffs on anything, Trump’s tariffs will be designed to accomplish two goals. The first is that he wants to bring trading partners to the negotiating table to come up with fairer trade policies. This is exactly what he did during his first term when he re-negotiated lopsided trade agreements with Canada, Mexico, Japan, South Korea, India and the European Union.

For those trading partners who are reluctant to re-negotiate favorable-to-them trade deals, Trump will create a sense of urgency by imposing or threatening to impose harsh tariffs. In the end, the hugely negative U.S. balance of trade will be reduced and maybe eliminated.

Second, Trump wants to bring manufacturing back to the U.S., so the tariffs he does impose will raise the cost to make products outside of the U.S. That means companies will be incentivized to make products in the U.S.

To ensure that actions do not have an inflationary impact he will reduce the corporate tax rate from 21% to 15% for all foreign made goods whose production returns to the U.S. He will also keep manufacturing costs down by having much lower energy prices.

After a year or so, the U.S. will see more growth, continued low taxes, less regulation, more domestic production, lower inflation, lower interest rates, stable housing prices, smaller government budget deficits and more opportunity for all Americans.

We will call that Trump’s “Morning in America.”

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