We will risk being accused of recalling only our accurate predictions, rather than our missed ones. The less said about Theresa May the better.
However, a few comments about Donald Trump are in order. In this blog in early 2017 we argued that Trump had the right policies for business; that his tax cuts would be the centrepiece of economic growth in the USA.
Whilst the progressive left still obsesses about his personal flaws and dream about impeachment, the US stock market broke all-time highs, economic growth hit 3.2% in the last quarter and unemployment fell particularly amongst disadvantaged cohorts.
And late in 2017 his tax package (written off by the commentariat) passed into law.
This sets the scene for a showdown in 2018 – the testing of two theories which will have big implications for the future direction of Western economies including Australia’s.
The left uses the term “trickledown economics” to denigrate the effectiveness of lower taxes. They say that it rewards the wealthy and that by the time benefits trickle down to the worker, there is precious little left over. According to this theory government revenue will fall, services will decline, and the social fabric will be destroyed. This fits neatly into the “equality” agenda peddled by the old Socialists, Bernie Sanders in the USA and Jeremy Corbyn in the UK. Both had electoral success with this rhetoric and Bill Shorten is adopting it in Australia. Get ready to be nauseated watching him 2018.
The converse is that lower taxes free up capital, create space for the private sector, encourage business investment and employment and in turn foster smaller government and greater reward for effort and individual dignity. In 2018 and 2019 we will get the chance to see which is right.
As far as the Stump is concerned there is no argument. Big Government is so self-serving and spends money so wilfully that a tighter revenue base is essential to force it to prioritise.
In Australia on past occasions where taxes have been lowered it has never resulted in lower overall revenue. The private sector is so resilient that it steps into the space created and the resultant growth delivers higher overall revenue. This is particularly the case where, as in the USA, the tax base is broad.
What Trump has done has gone much further than any of the timid efforts we have seen before. He has done that because he knows intuitively that there is scope to do it.
After years of declining US prestige and influence under the Obama administration, the mood in the USA is for bold action.
The left will do anything to prevent these policies because they see them as an existential threat.
The fear of the left is that people who discover the joys of independence might decide they like it. The state-run apparatus they have built relies on maintaining and increasing the base of dependent clients among low income workers, students, welfare recipients and families struggling to make ends meet. We have that problem in Australia where around half of working people get more in welfare than they pay in income tax.
But what represents the best prospects for these groups?
Is it a life of welfare dependence or is it the prospect of a good job in a growing economy?
We already tried a system where the State kept the population “equal”. It was called the Soviet Union. They made cars that would spontaneously combust and maintained a fearful police state to stop people leaving. They collapsed hollow and bankrupt in 1991.
America is not buying that philosophy.
In Australia, the tax debate is building up again. And we will have plenty to say about it.
As the Trump tax package works its way through the US economy, there will be plenty of evidence with which to meet the predictable opposition to lower taxes from the usual suspects in Australia.