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Unleash Prosperity Hotline
Issue #1219
03/11/2025
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1) Cutting Government Spending Is Pro-Growth
We keep hearing economists and politicians howling primal screams that the Trump/DOGE strategy of downsizing the government will crash the economy into recession. Apparently, government waste is a plus for the economy because it makes the GDP larger.
Really?
Let's say that Trump and Elon Musk's cost-cutting succeeds and we are able to ratchet down the government share of GDP from 25 to 20% of GDP.
Will that cause a recession? It didn't when government spending fell from 22 to 18% of GDP when Clinton was president and we had the peace dividend from the end of the Cold War. The economy boomed.
What Trump is proposing is nothing compared to the biggest government downsizing in American history. That happened after World War II. Paul Samuelson predicted massive unemployment when 10 million soldiers came home due to "massive dislocation."
In 1944, government spending at all levels accounted for 55% of gross domestic product (GDP), then dropped 75% in real terms, to 16% of GDP. See chart three years later. There was very little increase in unemployment.
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Instead, the government downsizing was the start of the famous post-World War II economic boom with minimal unemployment.
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Trump is realigning our economy away from excessive and inefficient government to a new golden age of technological progress and productivity. So cut away, Mr. President. All the economy has to lose is its political chains.
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2) How the USA Is Crushing Europe: Innovation and Entrepreneurship
A continuing HOTLINE theme is that despite Washington's best efforts to the contrary, over the past several decades the U.S. economy has left rusty old Europe in a cloud of dust.
This factoid from economist Edward Conard at the American Enterprise Institute caught our attention:
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Conard included this chart from MIT technologist Andrew McAfee, which is a picture worth 1,000 words:
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Even more astounding is this finding from the EU's official "The future of European competitiveness" report: ([link removed])
Europe is stuck in a static industrial structure with few new companies rising up to disrupt existing industries or develop new growth engines. In fact, there is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period.
Tariffs, socialism and industrial policy are the failed experiments of Europe. We cringe when we hear American politicians want to copy them.
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3) Meet Mark Carney, Canada's Version of Joe Biden or Worse
Canada is making a huge mistake in its tit for tar trade strategy (a game they can't win and only exacerbates the trade war). But now they're about to elect a new Prime Minister, Mark Carney, who is possibly worse than Trudeau.
Carney is a former central banker who has never run for office and has no political record.
But what we do know is all bad. He's a climate fanatic who served as U.N. Special Envoy for Climate Action and was creator of the Glasgow Financial Alliance for net zero carbon targets. (Why would an oil-rich nation like Canada want net zero?) He has to be the only former central banker to claim the radical Occupy Wall Street protests were "entirely constructive."
When freedom convoy truckers protesting Canada's COVID lockdown shut down Ottawa, Carney wwcalled the protests an "insurrection" and said it was "time to end the sedition.”
Nothing in Carney's tax-and-spend agenda addresses the unease ordinary Canadians feel that they are falling behind other nations. Canada's per capita income has fallen ([link removed]) to below 70% of what it is in the U.S. The average Canadian is now poorer than the average resident of Alabama.
Carney's agenda will surely make Canada poorer still.
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4) End the Airport TSA Union
Before 9/11, U.S. airports had private companies do security screenings at most U.S. airports. Other countries with safety concerns - such as Israel - had the same structure.
In the rush to pursue the war on terror, unions pressured Congress to create the Transportation Security Administration (TSA). Since then, it has grown to almost 50,000 mostly unionized employees. That may explain why TSA is infamously slow to adopt new technology that would reduce waiting lines at airports.
This may change with Friday's announcement that the Department of Homeland Security will end union collective bargaining for TSA agents. DHS says unionization is "being exploited by a select few poor performers, placing greater burden on officers at the expense of American travelers and taxpayers."
In an eye-popping revelation, DHS says TSA "has more people doing full-time union work than we have performing screening functions at 86% of our airports.
"Imagine going to the grocery store and seeing more cashiers chatting in the break room than at the registers--things would get backed up quickly," say our friends at Nevada News & Views who live in Las Vegas, one of the busiest airports in the world.
Federal government unions have launched lawsuits against any attempts to roll back union power at the nation's airports. But why not go further and revitalize a long dormant provision of the law creating TSA - that any airport should be able to switch back to private screeners as long as they met new federal standards?
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5) Shrink Fannie Mae’s Risk – Don’t Expand It
Anyone remember back in 2008 when the housing market collapsed and the stock market crashed by more than anytime since the Great Depression? Apparently the politicians in Washington don’t.
The institution that lost the most money and required the biggest taxpayer bailout wasn’t any of the major banks that teetered on the verge of bankruptcy, but Fannie Mae – the government-guaranteed enterprise that insures federal mortgages and was supposed to NEVER fail. Fannie received over $100 billion of taxpayer rescue funds.
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Fannie Mae is still in conservatorship and hopefully the Trump administration will move toward setting it free and severing all its federal strings so that taxpayers don’t get burned again.
Instead, Fannie and the housing lobby want to force taxpayers to take on tens of billions of dollars of new risk by eliminating title insurance on federally-backed loans and replacing it with… ta da: Fannie Mae as the de facto insurance provider.
This reckless Biden administration plan should have received a ceremonial burial when Kamala Harris lost the election, but Fannie and the housing lobby are using their political muscle to resurrect it under Trump.
This is privatization in reverse. Taking a well-functioning private insurance market, and replacing it with government guaranteed insurance coverage. Senator Tim Scott, the Senate Housing Committee chairman is heroically fighting against it ([link removed]) .
We can’t think of a dumber or costlier idea – which is why we are still worried.
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6) It's Broken
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