Summary
The new president’s intentions to institute a sharp change of policy in several important economic directions is clear. Unlike in his first term, he will from the start have put in place a cabinet of loyalists who fully buy into his agenda. Thus, most of the “guardrails” that applied in 2016 will be off. We should expect radical change and a bumpy ride. The United States faces a multitude of complex problems, and it is clear that President-Elect Trump will try to deal with them with simple and far-reaching solutions, very likely too simple and too far-reaching. Policies designed for immediate implementation to maximise populist appeal will often not generate the results intended. Increased tariffs on imports will reduce US output and will cost jobs, as well as hiking prices. Expelling huge numbers of illegal immigrants will deny firms the workers and customers they need, will reduce GDP and, again, put up prices. Tax cuts will leave the US debt profile unsustainable while taking an axe to government spending risks, tipping the economy into recession. The potentially most damaging and long-lasting policy mistake would be to end the Fed’s independence, which is already compromised. Inflation, a significant fall in the dollar, and a sharp rise in risk premia would be the clear result of politicising the Fed.Overall, the policy package outlined above is likely to be ill-considered, rushed, and damaging to the US and global economies.
file:///C:/Users/stan/Downloads/The-Economic-Effects-of-Trumponomics-PML2.0%20(2).pdf
The new president’s intentions to institute a sharp change of policy in several important economic directions is clear. Unlike in his first term, he will from the start have put in place a cabinet of loyalists who fully buy into his agenda. Thus, most of the “guardrails” that applied in 2016 will be off. We should expect radical change and a bumpy ride. The United States faces a multitude of complex problems, and it is clear that President-Elect Trump will try to deal with them with simple and far-reaching solutions, very likely too simple and too far-reaching. Policies designed for immediate implementation to maximise populist appeal will often not generate the results intended. Increased tariffs on imports will reduce US output and will cost jobs, as well as hiking prices. Expelling huge numbers of illegal immigrants will deny firms the workers and customers they need, will reduce GDP and, again, put up prices. Tax cuts will leave the US debt profile unsustainable while taking an axe to government spending risks, tipping the economy into recession. The potentially most damaging and long-lasting policy mistake would be to end the Fed’s independence, which is already compromised. Inflation, a significant fall in the dollar, and a sharp rise in risk premia would be the clear result of politicising the Fed.Overall, the policy package outlined above is likely to be ill-considered, rushed, and damaging to the US and global economies.
file:///C:/Users/stan/Downloads/The-Economic-Effects-of-Trumponomics-PML2.0%20(2).pdf
