A tale of two red-tape-cutting presidents

As Trump invited Americans to be part of the unprecedented US boom, we could learn from what he shares with another world leader.

US President Donald Trump addresses a joint session of Congress on Capitol Hill in Washington.

Like President Emmanuel Macron in France, Donald Trump has set the foundations for an extended period of American prosperity.

And so in an emotional state of the union address Trump invited the American to cast away the fake news and be part of the unprecedented US boom. And he also announced a new front in that boom--- massive infrastructure investment.

And he is likely to deliver the infrastructure boom using the same secret weapons that in just one year have created two million plus jobs and strong growth.

In a strange coincidence, the US state of the union speech came within 24 hours of the amazing French turnaround where Emmanuel Macron has used the very same secret weapons as Trump.

Yet the two leaders could not be more different.

Paradoxically, as that success of Trump and Macron becomes understood, stockmarkets are falling because the recovery is bringing to an end the ultra-low global interest rate environment.

Back in Australia, at least part of the US/French success secrets would also transform our prosperity in the unlikely event that an Australian Prime Minister embraced the Trump/ Macron formulas.

Back in Australia, at least part of the US/French success secrets would also transform our prosperity in the unlikely event that an Australian Prime Minister embraced the Trump/ Macron formulas.

The first secret is that conventional party machines don’t work in the new business environment. Trump won power via the Republican machinery but be came from the business world so was completely outside the conventional political mould.

Macron, as an investment banker from the internet generation, was even further outside conventional party politics.

So, the first success secret is that you need is wide experience outside old style politics and must also understand how business ticks, preferably having been there.

Our Prime Minister has that business knowledge but could not use it to embrace the second secret.

Indeed, politicians around the world remain mystified as to how a politically incorrect US President like Donald Trump can create some two million jobs and trillions of dollars in stockmarket wealth, especially as in the final year of President Obama’s term America feared a new recession.

And what is that second weapon? Most would give the widely publicised US and French tax cuts the credit. While the anticipation of the US/French tax revolutions (which the politically correct say “benefit the rich”) are important, the Trump/Macron momentum started long before the tax cuts.

And indeed in the US the pace of wealth and employment generation continued while the president was floundering in the political scandals of Washington.

Trump revealed his second secret in a short aside to his presentation at the World Economic Forum where he explained that regulations are a tax. Few global leaders understand this and usually base their campaigns on more regulation, which means more tax.

Trump as a businessperson has a real life understanding how regulations have become taxes.

Accordingly, the real US Trump tax revolution started from day one of his presidency when he started “draining the public service swamp”.

Trump believed he could abolish two regulations for each new one. But with the swamp drained his people discovered they could abolish 22 regulations for every one new regulation. And every regulation abolished was a tax reduced and a reduction in the costs of government administration.

Macron also brought his business knowledge to the appalling French mess and campaigned on the platform that the country’s excessive state regulation and watertight protection for labour needed a complete overhaul.

Macron comes from the internet generation and feels free to reject the orthodoxies of left and right. He told Time magazine: “the current organisation of the political world is no more relevant”.

And so we have two Presidents who could not be more different leading their countries into vast economic improvement using the same basic techniques, albeit the details are obviously different.

There is no doubt that Trump is correct — most business regulations are a tax, albeit sometimes a necessary tax.

Think of it in simple terms. If we stop energy developments via regulation it puts up the price of energy; if we regulate our food and our labour then almost always it will increase the cost; if we regulate our farming practices the same applies.

Now, I should emphasise society needs regulations and even though they might be taxes we can be better off for having those regulations. In other words taxing via regulation is important for any nation but in the US, and even more so in France, regulation has become an addiction for public servants and politicians alike.

Paradoxically in Australia the Coalition government started on the US/ French track by reducing regulation. But the addiction took over. The current government has turned into an art form duplicating nearly everything the states do. And the states respond by upping expenditure that duplicates the Commonwealth. Regulation multiplies and becomes more complex thus increasing the level of Australian tax.

Big slabs of our budget deficit could be eliminated by a couple of strong politicians who are prepared to stop this nonsense. We don’t see those people in the current government and I don’t think they exist in Bill Shorten’s opposition. Indeed the ALP does not understand the lower global tax momentum.

In Australia we have this enormous hidden regulation tax burden which is made worse by the blatant Commonwealth discrimination between states in revenue sharing and infrastructure spending.

A great deal of Trump’s job creation has been in the rust belts that suffered badly from the regulation. The people who voted Trump in are gaining their reward and have become the great beneficiaries of his policies.

Someday, the people in the depressed suburbs of Australia are going to wake up to the fact they suffer from the games being played in Canberra.

Tax cuts via regulation and conventional tax reduction are the agenda items that have made President Trump’s first year such an economic success.

But the next stage is more dangerous — a change in the trade rules and higher interest rates that look set to rise amid the growing prosperity.