A new conservative administration takes power with a supply-side agenda:

  1. Corporate tax deductions
  2. Deregulation in areas like power generation

Six years later, another conservative administration took office with a more pro-growth agenda:

  1. Corporate tax deductions
  2. Deregulation in areas like power generation
  3. YIMBY principles to encourage home building
  4. More highly skilled immigration
  5. Look for free trade agreements

Which is a better agenda? In the abstract, the second agenda is clearly better, more pro-growth. So why was the first agenda (adopted by Donald Trump) widely seen as a success, while the second (Lease Truss) was widely seen as a disaster? I see at least two reasons:

  1. Timing: When Donald Trump was elected, the US fiscal situation facing Truss in 2022 was much less dire. Britain’s national debt had reached relatively high levels and his proposed tax cuts and energy subsidies would strain the budget. Deficiency more deeply. And this was happening at a time when interest rates were rising around the world. As a result, the Trust’s tax and spending proposals spooked the bond market, causing interest rates to rise further and pushing the pound to record lows.
  2. Politics: Congress was willing to pass many of Trump’s key economic proposals (besides repealing Obamacare). The Truss faced widespread resistance to its supply-side reforms, with reports that even Conservative MPs balked at ideas such as encouraging more housebuilding and allowing fracking to boost energy production.

The truth is that luck plays a big role in politics. Most leaders are partly responsible for the state of the economy during their tenure. Truss policies can be quite successful if adopted in different times and places. The best way to look good is to inherit a depressed economy where stimulus is politically popular and economically desirable (recall FDR). The worst case scenario for a new administration is to inherit an overheated economy where unpopular contractionary policies are necessary (Reagan).

Rest assured. This tweet To help illustrate my point:


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