Trump adviser calls for red tape cut
Donald Trump’s top economic adviser has delivered a rallying cry for governments around the world to slash red tape, lift the regulatory burden from companies and thereby stimulate their economies at a time when central banks appear to be running out of room for manoeuvre.
Larry Kudlow, the director of the National Economic Council, claimed this approach had helped boost the economy in the United States during the Trump administration, and that other countries should follow the American lead.
‘‘Regulatory reform is very underrated as a fiscal stimulus tool,’’ said Kudlow. ‘‘I think that everyone should be focusing on that rather than hoping that central banks can produce a unicorn. All this central bank stuff [monetary policy] is so yesterday.
‘‘Cutting tax rates and reducing regulation is just so much more fun. High regulatory burdens create sclerosis in the economy.
‘‘Lower regulatory burdens have a tremendous impact on small and new businesses. I wish other [countries] would do more. The fiscal policy mix is unbalanced at the moment.’’
The US has rolled back regulation in areas such as environmental legislation and net neutrality among others.
There has also been an almost complete cessation of new rulemaking in Washington.
Economists say that this has provided a measure of certainty for businesses in the US, although it is hard to assess how much the deregulation drive has contributed to economic growth. Increasingly, Trump’s deregulatory efforts are being held up in the federal courts.
However, there is a growing consensus that central banks are running out of options to stimulate their economies, having slashed interest rates and held them low for over a decade while flooding their economies with liquidity through quantitative easing programmes.
Kudlow, who conceded that he had been ‘‘just a little’’ critical of the Federal Reserve in the past, offered some lukewarm praise for the US central bank: ‘‘The Fed has done a good job of reversing the rate hikes [of 2018].
‘‘I wouldn’t mind seeing them being a little bolder, but I don’t want to criticise them, because they are moving in the right direction.’’ However, he warned against the idea of central banks cutting rates below zero to fight the next downturn.
‘‘Negative interest rates are not a good idea: they hurt savers, they hurt banks, and they hurt the economy,’’ said Kudlow.
When it was pointed out to him that Trump appeared to welcome the prospect of negative interest rates in his speech at Davos, Kudlow said: ‘‘He’s keener on them than I am.’’
He added: ‘‘Real estate developers [who often take out large loans to finance their projects] like low interest rates; their banks don’t.’’