Regulations have been reduced under the Trump Administration – What is the potential impact on the economy?

Donald Trump’s presidency has opened up the door for deregulation at the federal level. This has had an impact on several industries. Now, given that these deregulatory actions are recent, the ramifications of these actions are ongoing and should continue to be analyzed. Nevertheless, the potential effect can be determined based on what is known about how economic deregulation influences advanced economies.

How exactly are regulations being eliminated under the Trump Administration? The answer lies within a specific executive department. On January 26, 2018, Office of Information and Regulatory Affairs (OIRA) Chair Neomi Rao spoke with the Brookings Institution about the progress the Trump Administration has made on reducing regulations in its first year. Ten days after taking office in January 2017, President Trump issued Executive Order 13771, which is intended to eliminate two regulations for every one introduced. With the power to roll back regulations as desired, OIRA carries an outsized influence relative to its small size within the executive branch. It can be seen that there have been significant actions that fall under the auspices of OIRA’s responsibilities, such as the Trump Administration’s proposal to repeal President Obama’s Clean Power Plan of 2015.

Now, the impact of these repealed regulations is still continuing to develop, but an idea of how these regulations will affect the economy can be ascertained from various analyses, including those from respected entities such as The President’s Council of Economic Advisers, which is comprised of economists who are intended to provide objective research for the White House and the Organization for Economic Co-operation and Development.

The President’s Council of Economic Advisers states that if the United States reduced regulation to the extent that it became one of the lowest regulated business environments in the industrialized world, it would result in increased economic growth by as much as 2.9% compared to the current rate. Furthermore, the Council of Economic Advisers contends that if regulation of the U.S. economy had remained at the same level it was in 1980, America’s economy would have been $4 trillion dollars larger in 2012 than it actually was, which would have made the economy “25 percent larger” than the actual size at the time. That is certainly no small sum. The Organization for Economic Co-operation and Development notes that the United States is currently one of the most regulated industrialized countries, ranking 27th out of 35 countries measured in product market regulation. With the proclivity of deregulatory activity occurring under the Trump Administration, it can be surmised that based on the data at hand, there could be additional economic growth as a result. Furthermore, a reduction in regulation would have the added benefit of making the United States more competitive relative to other countries in the global economy, which could be leveraged to attain further economic growth.

So far, the economy has been growing under President Trump. The deregulation of certain rules since 2017 is reducing a burden on various sectors of the economy and this less burdensome regulatory environment could very well have a positive effect on the economic growth of the United States.


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