The New York Federal Reserve estimates the U.S. economy will grow at an annual rate of nearly 4 percent in the fourth quarter. That would be after breaking 3 percent growth in the second and third quarters this year. The Trump economy is booming. And the New York Fed predicts the boom will continue, with growth above 3 percent in the first quarter of 2018. The last time we had four consecutive quarters of growth above 3 percent was 13 years ago, in 2004-05.
Can that kind of growth be sustained? Many economists are skeptical and point to President Trump's trade and immigration policies, which they say undermine his efforts. The passage of pro-growth tax reform last week, on the other hand, could help Trump keep his pledge.
But one thing Trump has done that has received little attention despite arguably driving today's economic boom is his decision to declare war on the regulatory state.
Government regulations are like millions of Lilliputian threats that tie down our economy and prevent businesses from expanding and creating jobs. As my American Enterprise Institute colleague Jim Pethokoukis points out, one recent study found that "the past 50 years of federal regulations have reduced real GDP by roughly 2 percentage points a year, or nearly $40 trillion. Instead of the US economy growing by just over 3 percent a year since World War II, it would have grown by over 5 percent a year." Put another way: Without all that regulation, our economy would be about four times larger than it is today.
We obviously can't eliminate all regulations — we all want clean air and clean water. But the unbridled growth of the regulatory state has imposed extraordinary burdens on job creators and robbed American workers of wages and opportunity.
Trump inherited a regulatory state that had grown to unprecedented levels under President Barack Obama. One way to measure the growth in regulations is by counting the number of pages in the Federal Register, the book the government publishes containing all new regulations. Seven of the eight largest annual page totals in American history occurred under Obama. Before Obama, no president had ever exceeded 80,000 pages in the Federal Register. In 2016, Obama became the first president to break the 90,000-page mark — 96,702, to be exact — and if you add his last 20 days in office, the total reaches 103,432.
Trump cut that number nearly in half. From Jan. 23 through Dec. 19 of this year, he has added just 53,550 pages to the Federal Register. And many of those pages were not new regulations but announcements of regulations being withdrawn. His efforts exceeded even those of President Ronald Reagan, who cut Federal Register pages by more than one-third during his time in office.
Obama also set a land speed record for "economically significant" regulations — regulations costing the economy $100 million or more. According to the White House Council of Economic Advisers, Obama imposed 494 major regulations during his time in office — a 38 percent increase over his predecessor. And in his final eight months in office alone, according to Neomi Rao, administrator of the Office of Information and Regulatory Affairs, Obama "saddled the economy with as much as $15.2 billion in regulatory costs."
When Trump came into office, he immediately began reversing this trend. He worked with Congress to repeal 14 major regulations implemented under Obama, and withdrew or delayed more than 1,500 others by executive action. Most important, he issued Executive Order 13771, which directed government agencies to eliminate two existing regulations for each new one issued, and to ensure that the net costs of any new regulations are zero.
Trump recently announced the first results of this effort: His administration achieved $8.1 billion in lifetime regulatory savings — and is on track to achieve an additional $9.8 billion in savings in fiscal 2018. Since excessive regulations are a hidden tax on American workers and businesses, that amounts to an $18 billion tax cut.
These actions have helped unleash the growth we are experiencing today. It is no mere coincidence that under Obama, the most regulation-happy president in modern times, GDP growth averaged less than 2 percent. Trump has done more in 11 months to lift those burdens than any president in modern history. He is regulating bureaucrats instead of businesses. Those efforts don't get a lot of attention, and they will not be enough to bring us to sustained 3 percent growth on their own. But without Trump's crusade to tame the regulatory state, the chances of doing so are zero.