The Bank of England and the US Federal Reserve yesterday reduced their interest rates by 0.25 percent. But no one should think for a moment that our two countries are on the same economic path: far from it.
The grim reality is that tax policy in the United States and Britain has never been more opposite, with Keir Starmer’s government and Donald Trump’s incoming administration heading in completely different directions.
Just hours after the vote, and before even entering the Oval Office, Trump has enriched millions of Americans, with the stock market rising to record levels on the result and bitcoin prices surging, leaving the average American several thousands of dollars richer, at least on paper.
To use his own phrase, Trump’s first term was a kind of “golden age,” especially for ordinary Americans. The bottom 50 percent saw their net worth soar 127 percent between January 2017 and January 2021, compared to a paltry 8.5 percent under Joe Biden.
New York Stock Exchange traders wear MAGA hats the day after Trump’s re-election
But if Donald’s clear record is to enrich his countrymen, Starmer’s downbeat rhetoric and mounting tax rises have left many Britons feeling considerably poorer since our election in July.
It’s bad enough that our Foreign Secretary David Lammy has called the incoming president “a KKK sympathizer and neo-Nazi” while others in the front row have been equally rude and hysterical.
In some ways, it is even worse that Chancellor Rachel Reeves has just embarked on an economic course completely opposite to the ‘Trumponomy’ that we will see on the other side of the Atlantic over the next four years.
Reeves’ preferred economic guru is the current US Treasury Secretary, Janet Yellen, an avowed, big-spending Democrat and one of the authors of ‘Bidenomics’ to which the UK Chancellor has put her banner.
Donald Trump has made millions of Americans rich, with the stock market rising to record levels on the result and bitcoin prices rising
Trump, meanwhile, is a center-right true believer in the magic of markets: He has seen for himself for decades the evidence that low taxes on income, businesses and corporations are the royal path to prosperity and higher standards of living, not an oversized Great Britain. The State taxes the people to the maximum and chooses how to distribute the receipts.
It is no coincidence that the “brains” of Trump’s top economists include Arthur Laffer, the man behind the famous “Laffer Curve,” which argues that high tax rates reduce total government tax revenue: the calculation that inspired Ronald Reagan’s free-market revolution in the 1980s.
Labor’s recent budget foolishly and, it turns out, prematurely sought to copy Biden’s view that big government can fix anything. Biden’s grossly misnamed American Inflation Reduction Act, which poured tens of billions of dollars into an elaborate climate change agenda, is one of the reasons Democrats took such a beating in the election. presidential and congressional elections on Tuesday.
The federal spending frenzy may have temporarily boosted U.S. growth rates by 2.7 percent in the third quarter of this year, but it clearly failed to tame the beast of inflation felt by millions of Americans. every time they put gas in their cars, buy groceries or pay their bills.
The pessimistic rhetoric of Starmer and Reeves and increasing tax increases have made many Britons feel considerably poorer.
There could not be a starker difference between Trump’s approach and the top-down statist methods of Starmer, Reeves and the defeated Democrats.
In her budget last month, Reeves raised taxes by around £40bn and, despite her and Starmer’s vague promises to pursue “growth” before the election, any measure that would have actually achieved this was virtually absent from his statement, which punished employment, farmers and businessmen.
Of course, Trump’s approach could still backfire. He has threatened heavy trade tariffs: 60 percent on Chinese goods and up to 20 percent on the rest of the world, including Britain. This could lead to an increase in prices in the country and a drop in global trade.
Bond markets are also concerned that Trump’s huge tax cuts could worsen the budget deficit he inherited from Biden, potentially adding trillions of dollars to the US national debt. However, Musk believes he can cut government spending, just as he cut staff at his social media site X/Twitter.
Britain’s growth prospects look doomed as we suffer the worst of Reeves’ misguided budget. But Trumponomy is offering America the opportunity to escape inflation and debt and grow back to prosperity.
