Political scientists will debate the forces that shaped Donald Trump’s victory, but one thing is clear: Americans yearn for a change in economic policy. Voters have rejected the interventionist policies that brought inflation and high deficits. They want an economic awakening, a new way forward that uses traditional economic policies to achieve Mr. Trump’s goal of more jobs for Americans whose fortunes have been harmed by technological change and globalization.
Any economic path to a successful awakening begins with growth: the engine that powers individual income and our collective ability to support the nation’s defense, economy, education and healthcare industry. To pursue this growth, the new administration should consider at least three measures:
First, by working with Congress, it should build on the successes of the Tax Cuts and Jobs Act of 2017 to make permanent the expensing of business investment. Second, it should increase support for science and defense research, which would have significant spillover to the commercial sector, particularly in space exploration. Third, it should build on this research by constructing applied research centers around the country, linked to regional university and city hubs. Like the land-grant colleges of the 19th century, these centers would generate and distribute knowledge, improving local capabilities in manufacturing and services.
Opportunity is also a pillar of the awakening. Community colleges are an underfunded source of skill-building and mobility. As Austan Goolsbee, Amy Ganz and I proposed in a 2019 report, a modest federal block grant to support community colleges on the supply side—rather than a demand-side emphasis on financial aid—can help these schools push more Americans toward better jobs by working with local employers on skill needs and curriculum development. Targeted aid to places with depressed economic activity can help distribute opportunity to communities better than one-size-fits-all Washington-directed programs.
Corporate tax reform can play a role, too, by improving incentives for companies to settle and invest in the U.S. This can magnify opportunities for Americans, all without having to rely on costly tariffs.
Working a job doesn’t merely generate income; it also promotes human dignity. Enlisting more people into the workforce is thus another element of the economic-policy awakening. While growth and opportunity policies can boost labor-force participation, strengthening the earned-income tax credit to boost the incomes of childless workers can help attract younger people to the workforce. Maintaining the child tax credit can also provide parents with easier pathways toward economic participation.
These ideas share several important themes with Mr. Trump’s campaign and the traditional conservative playbook. They emphasize that policy ideas should be practical and workable, not merely rhetorical. Each makes use of America’s federalist system and innovative ethos. Making a priority of strong local involvement in applied research centers and community colleges and as tailoring place-based aid are more effective approaches than Washington diktats. Programs need to be held accountable for results, not simply allocated money.
This economic-policy awakening requires a clear-eyed assessment of budget trade-offs. Profligate spending with little regard for debt and inflation—à la the American Rescue Plan—contributed to Mr. Trump’s victory. It is possible to accomplish the steps above in a fiscally responsible way by offsetting spending and tax changes.
Organizing for the policy awakening’s success will be essential. Lack of communication among cabinet agencies can stymie creative ideas for expanding the economic pie for American workers. Like the president’s Working Group on Financial Markets, created by Ronald Reagan in 1988 to convene disparate agencies, the new administration would benefit from a senior executive team that can coordinate economic ideas and learn from leaders in business, labor and social services. Such a body, unlike the National Economic Council, could more adeptly cut across silos related to tax, trade, regulatory and industrial policy.
Voters have signaled they’re ready for an economic awakening. The president-elect, equipped with a new playbook and vision, should seize the opportunity.
This article was originally published by The Wall Street Journal.
