The jury is out and the predictions from economists are varied. The elections were supposed to reduce the concerns and uncertainty prevalent in our country; they have not. While there is now hope, uncertainty about our economy is stronger than ever. A Trump presidency fundamentally challenges the future of globalization and status quo capitalism.
We may well be in for a volatile time. What happens to our trading partners affects us. The Mexican peso is the lowest it’s been in over 20 years, our trading partners are concerned about our trade agreements with them, and the 4% growth rate he predicted raises eyebrows.
However, Donald Trump has the potential to be a “massive force for good for the economy.” The story of the American economy in the past eight years is one of tension between an aggressive “monetary” policy and a nonexistent “fiscal” policy.
Mr Trump ran on a platform of change which appealed to many Americans… However, while he said ”I alone can fix it,” referring to our country’s woes economically and other, he can decidedly not “fix” it by himself. Elections usually circle back to the economy, wages, jobs, taxes, imports, exports and while new presidents might say one thing in their campaign promises the reality of governing is a whole different matter.
If Congress drags its feet when he presents several of his new proposals, he may well have to follow President Obama’s lead and advance his agenda through executive orders and regulatory policy. Republicans may have just enough of a majority, or not enough
Still, Mr Trump’s election is causing some economists to reassess their economic forecasts with a prediction that real growth, inflation and bond yields could possibly rise faster in coming years.
According to Sean Snaith, Director of the Institute for Economics Competitiveness at the University of Central Florida, the change in administration could “knock the economy out of its low-altitude, low growth orbit… however will it put the economy in a higher growth orbit, or will it knock us down into the atmosphere and fiery re-entry?”
The environment our President–elect inherits is a volatile one. There was a strong stock market bubble before he was elected which has gone up even further. We have a debt bubble of over $20 trillion and interest rates that have been too low for too long; just this could torpedo anything he does economically. Some economists are concerned his tax plan alone could increase the deficit even further, some say by $5 trillion.
President Trump begs to differ. He maintains that the economic growth will pay off in the long run. According to his senior policy advisor, Peter Navarro, ”everything that Mr Trump is going to do points in the direction of growth. … The last thing you want to do is raise taxes to fund an infrastructure program…That will not happen in a Trump administration.”
Trump supporters believe Trump can do all of this in a responsible way. The first thing Trump mentioned in his victory speech was the spending on infrastructure. “We are going to fix our inner cities, and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” he said. “We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”
The cautious optimism revealed in The Wall Street Journal’s latest monthly survey of economists owes to the belief that the Republican’s proposals to reduce taxes and invest in infrastructure will amount to a substantial fiscal stimulus
We’ll wait and see. Promises are often made by our politicians and the reality is often a very different one. One area I can very much relate to though is his pledge to slash the regulations that have crippled our community banking system, burdening businesses and job creation. That at the very least is a step in the right direction.