The Trump Administration’s red tape reduction agenda

Sector regulation Deregulation Red tape United States of America

President Donald Trump entered the White House with a promise to undertake a series of economic reforms to boost economic growth, business investment, and job creation. Foremost amongst Trump’s objectives was to re-invigorate the manufacturing, coal, and heavy industrial sectors located in America’s Midwest. A key initiative to achieve these objectives is the Trump Administration's red tape reduction and deregulation agenda.

Within ten days of inauguration, President Trump commenced his Administration’s deregulation agenda through issuing a Presidential Executive Order (EO), Reducing Regulation and Controlling Regulatory Costs. The executive order states that “for every one new regulation issued, at least two prior regulations be identified for elimination”, and that the “total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero.” In other words, the EO required a net reduction to the stock of regulation in place, and a net zero increase to the cost of new regulations introduced.

This paper finds the Administration’s deregulation agenda, along with a range of other free market policies including a reduction to the corporate tax rate from 35 per cent to 21 per cent, liberalisation of the domestic energy sector, and instant asset write-offs, has contributed to a number of positive economic outcomes, including:

  • The lowest unemployment rate in 50 years.
  • New private sector business investment above both the 20- and 40-year averages.
  • Improved economic growth compared with recent trends.
  • An increase to average quarterly business applications (a proxy for new business formation) from 650,000 in 2016 to 826,000 in 2019.
  • A net increase of 422,000 jobs in the manufacturing since 2016

This paper also identifies four key pillars which have underpinned the success of the Trump Administration in reducing red tape, including:

  • A one-in-two-out requirement where two regulations (in this case, “significant” regulations) are repealed for every new regulation introduced. This places a constraint on the bureaucracy and creates an incentive to economise on the promulgation of new rules.
  • Delay or elimination of Obama-era rules which stemmed the flow of incoming rules.
  • Streamlining of regulatory approvals, particularly in the manufacturing sector and in relation to environmental requirements, which expedited the establishment of new projects.
  • Restructuring of the Executive Branch via issuance of an executive order to reorganise governmental functions, including the elimination of unnecessary agencies, components of agencies, agency programs, and to merge functions.
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