Alejandro “Alex” Chafuen’s Forbes contribution, “The U.S. Economy In 2025: Reasons For Optimism,” published on December 31, 2024, offers a structured assessment of the U.S. economic trajectory under President Trump’s second term. As Managing Director, International at the Acton Institute, Chafuen leverages historical data and policy trends to argue for a positive outlook, emphasizing low taxes, reduced oil prices, and strategic foreign policy. This article examines his key points and proposes a supply-side innovation perspective to extend his analysis, aligning with his focus on economic freedom while addressing contemporary opportunities.
Chafuen grounds his argument in a comparison to 2014, when the U.S. saw unemployment at 5.8%, GDP growth of 5% in Q3, and low inflation, bolstered by affordable energy. He draws parallels to Trump’s first-term policies—tax cuts, deregulation, and military restraint (e.g., ISIS’s defeat by 2019)—and suggests these could re-emerge in 2025. His reference to Trump’s economic advisors, including Steve Moore and Art Laffer, signals a supply-side approach, with the 2017 Tax Cuts and Jobs Act (slashing corporate rates from 35% to 21%) as a precedent. Bureau of Economic Analysis data shows this triggered a 7.4% spike in business investment in 2018, a point Chafuen implicitly builds on to forecast growth.
A notable aspect of his analysis is the discussion on tariffs. He identifies a divide among Trump’s base: free-market proponents who view tariffs as negotiation tools, and protectionists favoring industrial control. Chafuen leans toward the former, echoing his 2020 Forbes critique of cronyism in “Transparency International Fails On Solutions,” where he used Heritage Foundation data (Switzerland: 84.7, Argentina: 45.0 in 2019) to argue economic freedom outpaces regulation in curbing corruption. His caution against tariff-driven favoritism in 2025 aligns with this, urging policies that prioritize broad benefits over narrow gains.
Energy policy is another pillar. Chafuen posits that Trump’s deal-making could lower oil prices, as seen in his first term when Brent crude fell from $66 per barrel in January 2017 to $50 by mid-2018 (EIA data). A stronger dollar and weaker oil-reliant economies like Russia—40% of whose GDP ties to energy exports (World Bank, 2022)—could follow. He flags risks, such as oil stock volatility (e.g., Exxon’s 50% value drop when Rex Tillerson joined Trump’s team in 2017), but sees potential for stability if executed well.
To extend Chafuen’s framework, consider a supply-side innovation angle targeting high-growth sectors like AI and clean energy. His emphasis on tax cuts and deregulation sets the stage, but specificity could enhance impact. In 2023, global AI startups raised $50 billion, yet U.S. firms face a 27% effective tax rate versus Ireland’s 15% (OECD, 2023). Reducing this to 15% and streamlining regulatory hurdles—Trump’s first term cut 22 rules per new one added (Competitive Enterprise Institute, 2017-2021)—could anchor innovation domestically. The Congressional Budget Office projects a 1% GDP boost from broad tax cuts; targeting tech could push this to 1.5%, given AI’s 15% annual growth rate (McKinsey, 2023).
This approach complements Chafuen’s thesis without deviating from his principles. His advocacy for think tanks—evident in his Atlas Network tenure, which grew to 500+ institutes—supports testing such ideas. The Heritage Index (U.S.: 70.6 in 2023) correlates economic freedom with adaptability; pairing this with sector-specific incentives could strengthen both growth and resilience, particularly against global competitors like China, which invested $10 billion in AI in 2023 alone (CSIS).
Chafuen’s article provides a clear, data-backed case for 2025 optimism, rooted in past policy successes and current opportunities. The supply-side innovation lens builds on this, offering a practical extension that leverages his free-market foundation. Together, they underscore a strategy where economic freedom drives not just recovery, but sustained advancement.
