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Tax Reform and the Republican Manufacturing and Growth Agendas

Thomas J. Duesterberg & Ike Brannon

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The surprisingly strong electoral showing of Republicans in 2016 owed a great deal to general dissatisfaction with the slow economic growth since the Great Recession, especially in the manufacturing sector. President Trump swept the industrial heartland by appealing to out-of-work or underemployed industrial workers and the many affiliated service sector workers who depend on a strong industrial economy.

Nearly six months into the new administration, many of the policies offered by Trump to address the decline in manufacturing and stimulate a recovery — building a border wall, rewriting trade agreements, rebuilding infrastructure, imposing buy-U.S. programs, and reforming healthcare — appear to be stymied, at least in the short term. The bump in “animal spirits” attributable to Trump’s effective early use of the bully pulpit and the anticipation of the administration’s deregulatory actions will prove temporary in the absence of major new programs, most of which require legislative cooperation or international agreements.

In this environment, tax reform is the repository of hope for accomplishing the major goals of the Republican economic agenda.

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