Professor Richard Epstein
The Trump administration released a thumbnail sketch last week of its much anticipated tax plan, which has generated opposition and support from all the usual suspects.
The Trump administration has bit the bullet, and to the outraged dismay of the political left has withdrawn from the Paris accords. That agreement, which went into effect on November 4, 2016, just days before Donald Trump’s election is a complex affair in which the United States made the key “voluntary” commitment to reduce its carbon dioxide emissions in the next decade by about a quarter of their 2005 rate, with further reductions to come thereafter.
The Trump administration has revealed a one-page tax plan that, if implemented, could have vast consequences for the economy of the United States. The high points of that plan are simplification and repeal. The brackets go down from seven to three - 10%, 15%, 35%. Corporate tax rates are slashed from 35% to 15%.
No matter what happens next, last week’s stunning “LEAVE” vote on Brexit has permanently disrupted the status quo ante. Both the Conservative and Labour parties are facing major leadership changes; conservative Prime Minister David Cameron has resigned, and Labour’s Jeremy Corbyn has been besieged by his shadow cabinet for his tepid support of the REMAIN option.
They are both dead wrong on economic policy. The terrible economic news from both Europe and the United States has led to much soul-searching on both sides of the Atlantic. How did we get here, and how can we get out of this jam? Both economies will be able to extricate themselves from their deep slumps only by promptly reversing those policies that have brought them to the brink. A successful and sustainable political order requires stable legal and economic policies that reward innovation, spur growth, and maximize the ability of rich and poor alike to enter into voluntary arrangements. Limited government, low rates of taxation, and strong property rights are the guiding principles.
When I first visited New Zealand in July of 1990 at the invitation of the New Zealand Business Roundtable, one mission stood out above all. My job was to find some sensible way to stem the ever increasing tide of regulation in Kiwi employment markets. Ironically, the immediate target of that visit was the then Labour Party’s recently enacted, but short lived, system of “pay equity,” which would put the government in the happy position of deciding the relative wages for men and woman in all the different kinds of jobs thrown up by a modern economy.
It is now eighteen years since I first visited New Zealand as a guest of the New Zealand Business Roundtable. Yet that period of time is long enough to document the early rise in growth during the period between 1992-2000, followed by the much more anemic growth in the period between 2000 and 2006. The trend rate of labour productivity growth in the measured sector was about 2.7% in the first period and 1.3% in the second. The point of the divide is no accident, for the year 2000 marks the rise of the current Labour government to power, and the gutting of the Employment Contracts Act of 1990, which I am happy to say I helped promote on my first visit to New Zealand.
It is a regrettable truth about political discourse that no bad lesson ever gets unlearned. The climate of political opinion in the United States , and probably in much of New Zealand , offers somber confirmation of that melancholy truth. At issue in both nations, and everywhere else around the world, is a struggle two models of economic organization. One is market driven. The other is corporatist.