Trump and the Economy

[kscarbel2]

Trump’s economic policy explained: the era of fiscal restraint is over

The Financial Times  /  November 10, 2016

As Donald Trump prepares for the White House, a theme is beginning to emerge: the era of fiscal restraint in the US could be coming to an end.

Mr Trump was scathing during the campaign about the increases in US national debt under Barack Obama, and the businessman at one point claimed implausibly that he would pay the entire $19 trillion stock off in eight years.

Yet as bond markets have been recognizing over the past 48 hours, by prioritizing tax cuts and an infrastructure package for the first 100 days of the Trump administration, his team appears to be envisaging a stimulus program that comes at a time when the US is already close to full employment. That could mean not only higher growth, but quicker inflation.

If this is indeed what the Republican-led Congress signs up to next year, it would represent a major shift at a time when organizations including the International Monetary Fund have argued in favor of greater budgetary support around the world.

The upshot for the Federal Reserve could be an acceleration of the return to more normal interest rates.

“Fiscal policy is coming back big-time relative to what we have seen in the past five or six years,” said Torsten Sløk, chief international economist at Deutsche Bank. “From a Fed perspective if fiscal policy is coming back the corollary to that is monetary policy will have to do less easing.”

What does the plan entail?

Mr Trump’s plans for cutting personal and business taxes would, according to analysis from the Tax Policy Center, lead to a rise in the federal debt by $7.2 trillion over the first decade. In addition, Mr Trump’s transition team has pledged to invest $550 billion in infrastructure and has spoken of ramping up defense spending, including adding 42 ships to the navy and renewing nuclear and missile defense. The agenda also includes supply-side measures such as a regulation-slashing blitz.

His sketchy fiscal plans will now have to be fleshed out in dialogue with Congress. A template on the tax side is the Better Way plan of Paul Ryan, House speaker, which is a more conservative package but overlaps with Mr Trump’s by reducing corporate income tax and consolidating the number of income tax brackets as well as lowering some rates.

How about the infrastructure side?

The fact that Mr Trump mentioned infrastructure in his acceptance speech in the small hours of Wednesday morning underlines how important this component is. He rode into victory on the back of support from Midwestern states where his supporters will want to see tangible signs of government action on jobs. New bridges and roads are an obvious way of delivering.

What will help Mr Trump in this area is the bipartisan consensus that has emerged over the need for renewal of US infrastructure. The American Society of Civil Engineers has projected a $1.44 trillion funding investment gap between 2016 and 2025 on infrastructure. Infrastructure was a component of Hillary Clinton’s plans for her first 100 days as well.

Trump advisers have suggested that he is willing to increase the national debt in order to provide federal funding for infrastructure, which would give a further push to the prospects of a fiscal stimulus. The problem is that planning infrastructure projects takes time, so it is not clear how quickly the growth effects would come.

What will Trump do on trade?

Mr Trump’s campaign promises to rip up or renegotiate deals like the North American Free Trade Agreement and combat unfair trade practices by China by imposing punitive tariffs have drawn dire warnings from economists of a potential return to recession.

Were he to pull the US out of NAFTA, it would threaten the elaborate North American supply chains that many US corporations rely on. A trade war with China would yield higher prices for consumers and fuel inflation. It would also hurt companies that depend on Chinese imports as well as American farmers and other businesses for whom China has become an important export market. Delivered concurrently and in their most radical forms both pillars would yield a significant blow to US growth.

For that reason some trade experts have already begun to argue that, while a Trump administration is likely to bring more anti-dumping and other high-profile trade cases against China, it may not deliver the entire radical agenda he has threatened.

What about Fed reform?

Mr Trump’s advisers have suggested the Fed’s ultra-stimulative policies are unfair by penalising savers and have led to unequal implications for different segments of society. During the campaign Mr Trump was ferociously critical of Janet Yellen, the Fed chair, for her low-rates policies, but she is not expected to resign before her term expires in 2018.

The focus on the Fed will firstly be the filling of two vacant Fed Board seats, potentially with more hawkish policymakers. Secondly there is the question of reform proposals that have been circulating among Republicans in Congress for some time. These include measures to steer the Fed towards the use of stricter monetary rules — something it fiercely rejects. Mr Trump’s arrival could provide a boost to conservative lawmakers advocating those ideas.

What does this mean for the economy?

While Republicans have tended to brand themselves as the party of fiscal conservatism, their new president may lead them down the path of stimulus. And while the party used to fly the free-trade banner, Mr Trump ran on a platform of protectionism — which would alienate Republican business backers. Untangling the true policy priorities is going to be fraught.

“These are promises and not proposals,” said Diane Swonk of DS Economics. “The question is which promises does he deliver to core constituencies who got him elected, and what does he deliver on the pro-business side?”

[mrsmackpaul]

I hope you all know what you are doing over there, all I know is "its pretty hard to unscramble a egg" as we say

As a young bloke a tradesman of mine when I was doing apprentice ship used to say when describing me  "In like a lion and out like a lamb" LOL

Learnt a lot from that tradesman one thing he did teach me was its ok to have enthusiasm but think long and hard before going of down that track

 

Paul 

[41chevy]

5 hours ago, mrsmackpaul said:

I hope you all know what you are doing over there, all I know is "its pretty hard to unscramble a egg" as we say

As a young bloke a tradesman of mine when I was doing apprentice ship used to say when describing me  "In like a lion and out like a lamb" LOL

Learnt a lot from that tradesman one thing he did teach me was its ok to have enthusiasm but think long and hard before going of down that track

 

Paul 

Not to worry, I'm sure he'll be assassinated by a paid shill from the other party.

[david wild]

Yeah, you assassinate Trump and you will have a civil war, and I will be on the front line.  

[mrsmackpaul]

7 hours ago, 41chevy said:

Not to worry, I'm sure he'll be assassinated by a paid shill from the other party.

LOL, it's all good as far as I'm concerned. It's not my country. And as I tried to explain to someone smarter than I, the people have spoken, a bit like the Brexit thing, the people have spoken.

So to all the cry babies out there, as we would say out here, "take a tea spoon of cement and harden the F--k up". LOL the people have spoken.

Paul

[41chevy]

4 hours ago, david wild said:

Yeah, you assassinate Trump and you will have a civil war, and I will be on the front line.  

I don't trust the media, Democrats and definitely Soro's. Just look how the media is is glorifying the a holes protesting Trump. All look like kids, and basement dwellers. I'm sure Soro's, HRC, Valerie Jarret or one of their dirty dozen will pay someone off to act.

Edited November 12, 2016 by 41chevy

[kscarbel2]

CNN Money  /  November 11, 2016

Warren Buffett was a vocal backer of Hillary Clinton. So what does the Berkshire Hathaway CEO think of President-elect Donald Trump?

"I support any president of the United States. It's very important that the American people coalesce behind the president," says Buffett.

"That doesn't mean they can't criticize him or they can't disagree with what he's doing maybe. But we need a country unified," Buffett added. "He deserves everybody's respect."

That's a turnaround from what Buffett told Berkshire Hathaway shareholders before its annual meeting in Omaha in April.

When an investor asked him if he'd be worried about how his businesses would perform under a President Trump, Buffett said "that won't be the main problem."

But Buffett took a more conciliatory tone Thursday, even as he defended why he still thinks Clinton was the better candidate.

"You have to choose between two people and I chose Hillary," saying that her temperament was the number one reason why he endorsed and voted for her.

Buffett said he understands why Trump won. Many Americans are resentful about the wealth gap in the country.

Can Trump fix that? Buffett said he was skeptical of some of Trump's claims about how fast he can grow the economy.

"Nobody can grow the economy 4% in real terms over time," Buffett said, referring to a Trump campaign promise. "The math is too extraordinary."

But Buffett thinks that even 2% annual growth over a period of a few years will lead to wage growth and gains in the stock market.

Speaking of stocks, Buffett said he was not surprised to see the market rally after Trump won. He thought concerns the market would tank due to Trump were "silly."

This week's rally has helped make Buffett even wealthier.

Berkshire stock has popped. The company owns and operates the big insurer Geico and railroad Burlington Northern Santa Fe. Berkshire also invests heavily in large financial firms and industrial giants. Those sectors have been big winners since the election.

Investors have been betting that Trump will seek to cut back on regulation of banks and other industries and also spend more to repair highways, bridges and other parts of the nation's infrastructure.

Buffett said he was buying stocks a few weeks ago when he thought Clinton would win -- and that he continued to do so this week after she lost.

He said stocks will be higher 10, 20 and 30 years from now and that would have been the case if Clinton won.

And he continued, as he has done for years, to stress that America is a "fantastic country."

At the end of the day, Buffett said he's not worried about Trump trying to enact some of the more controversial things that he talked about in his campaign, such as cracking down on immigration and enacting isolationist trade policies.

"There are a lot of things said in campaigns that don't happen after the election," he said.

Asked about Trump's proposal to impose 35% tariffs on goods imported to the U.S. -- Buffett said: "It's a bad idea, a very bad idea, but I'm not going to say it is going to cause a recession."

He also didn't seem worried about Trump's mixed track record as a businessman. Buffett even joked that President Harry Truman ran a failed haberdashery store and that "he turned out to be a terrific president."

Buffett said he thought Trump was very good at licensing and promoting his name. But he continued to argue that Trump didn't have a great track record of operating casinos and other Trump-branded businesses successfully.

That isn't Buffett's concern.

"I don't have to worry about him running a business anymore," he said.

But if President-elect Trump called Buffett asking for advice on the economy, would Buffett offer a hand?

"I would do that with any president. I've never called a president in my life. So I I don't initiate 'em. But ... but if any president asks me for help in any way, I mean, that's part of being a citizen," Buffett said.

[grayhair]

The Tax Policy Center is hardly impartial, but rather a political tool of the left wing liberals.  And the Financial Times article is long on opinion and conjecture and a bit short on real facts.  Just what I'd expect from them. And frankly, I am proud to have voted for someone that Buffett dislikes.

I'm sure there are millions of us working stiffs out here in fly-over country that are tired of being told we must vote for either the Bush dynasty or the Clinton dynasty.  

[41chevy]

4 minutes ago, grayhair said:

The Tax Policy Center is hardly impartial, but rather a political tool of the left wing liberals.  And the Financial Times article is long on opinion and conjecture and a bit short on real facts.  Just what I'd expect from them. And frankly, I am proud to have voted for someone that Buffett dislikes.

I'm sure there are millions of us working stiffs out here in fly-over country that are tired of being told we must vote for either the Bush dynasty or the Clinton dynasty.  

Don't know about y'all in fly over country but we here in Deplorable Farms say Howdy.

Here's a few of my HRC voters.

[kscarbel2]

10 hours ago, grayhair said:

The Tax Policy Center is hardly impartial, but rather a political tool of the left wing liberals.  And the Financial Times article is long on opinion and conjecture and a bit short on real facts.  Just what I'd expect from them. And frankly, I am proud to have voted for someone that Buffett dislikes.

I'm sure there are millions of us working stiffs out here in fly-over country that are tired of being told we must vote for either the Bush dynasty or the Clinton dynasty.  

With both Americans and people around the world dying of curiosity, the media is attempting to provide some information. I actually like the Financial Times. CNN was superb in the very beginning (1980) under original owner Ted Turner, revolutionary in fact and truly global in scope, but now it seems to be a government mouthpiece designed to steer the masses. What I dislike about the mainstream U.S. media most of all is the way they now "dramatize" the news, and as you said report oozing with opinion (I don't want their opinion.....just report the news, neutrally, and I'll form my own opinion).

[HeavyGunner]

24 hr news channels are what brought on opinion-based "news".  When you have 24 hours to fill instead of 30min-1hour, everything becomes a story. When you can't stand out from the competition with your "news", put a slant on it to get attention, find out how to rile the people up by saying and editing things out of context to further your ratings and agenda. I never have had cable or even rabbit ears since I graduated high school didn't like the media bs (or the price of cable) then or now. Netflix and amazon prime are perfect for me since everything on there is new to me with out the commercials. 

[TeamsterGrrrl]

Good points. But the problem isn't that there's not enough news material to fill a 24 hour day- The devil is in the details, and from listing to shortwave over the years I could easily find enough different news stories to keep me amused. Same for the good hosts like Larry King on AM radio, who kept me awake many a night on the road. But now we've got 24 hour news stations that just keep repeating the same stories for days, because it's cheaper than hiring enough reporters to dig up the forgotten stories to fill the day.

[HeavyGunner]

4 hours ago, TeamsterGrrrl said:

 But now we've got 24 hour news stations that just keep repeating the same stories for days, because it's cheaper than hiring enough reporters to dig up the forgotten stories to fill the day.

Never even thought about news corporations maximizing their profits by not paying good jounalists to dig up quality stories. One of the very few radio stations I can get is a couple of am news stations and they have the repeat the same everything every 15 min. My satellite radio antenna or power cord has broke on me and that's the only time I'll listen to terrestrial radio...for a few minutes then the drone of the engine starts sounding better. 

[TeamsterGrrrl]

It was cheap satellite transponder time that we got a couple decades ago that gave birth to multi station talk radio- Before that only a handful of networks could afford satellite or terrestrial relays. Add in the availability of cheap microcomputers to automate programming, and it became more profitable to put a satellite dish outside the station, a computer inside, and lay off the local talent that formerly provided the programming.

[kscarbel2]

Steve Mnuchin and Wilbur Ross shortlisted for top economic roles

The Financial Times  /  November 15, 2016

Trump signals he plans to pursue pro-growth and business friendly economic policy

US President-elect Donald Trump is sending another strong signal that he plans to take a pro-growth and business friendly approach to economic policy, with leading New York investors Steve Mnuchin and Wilbur Ross on his short list for Treasury and Commerce secretary.

The pair on Tuesday won the endorsement of billionaire investor and Trump backer Carl Icahn who announced after speaking with Trump that they were in the running for the top economic roles.

“Both would be great choices,” Icahn said. “Both are good friends of mine but, more importantly, they are two of the smartest people I know.”

Both men are pragmatists and free marketeers who would focus on ways to unleash US growth through business-friendly policies.

Mnuchin, a 17-year veteran of Goldman Sachs who served as the Trump campaign’s chief fundraiser, is chairman of Dune Capital Management and Dune Entertainment Partners and a longtime business associate of Trump.

The softly-spoken Ross is a private equity investor with a long history of striking deals around the world. He served as a senior economic adviser to the Trump campaign and was one of the main public articulators of his trade policy.

Ross said the top economic priorities for a Trump administration would be encouraging infrastructure investment, the repatriation of profits parked overseas by US multinationals and corporate tax cuts and other measures to encourage investment. Among those is a plan designed to make it easier for companies to write off capital expenditures, much as they can now write off the interest they pay on debt, though not both at the same time.

“We are tying to spur more investment. The big lagging thing in our economy has been shrinkage of gross private sector investment. I think it is one of the reasons why [US] productivity gains have not been so strong [in recent years],” Ross said.

Low investment and bad trade agreements were in fact the two biggest things holding back the US economy, he said.

But Ross also rejected the charge that a Trump administration would herald a new era of American protectionism, saying it would be focused on negotiating smarter trade pacts with the US’s major trading partners.

A Trump administration would work to narrow its trade deficit with China and other countries. But it would not do so by applying blanket tariffs on imports from any country, he said.

“The U.S. is the reason why the whole world has a trade surplus. We have a $500 billion deficit which is a 3 per cent permanent reduction in the size of our economy,” Ross said. “Cutting our balance of payments deficit doesn’t mean slapping on 45 per cent tariffs on everything from China. Absolutely not.”

“But here is the key issue. We should treat ourselves as the world’s biggest customer and treat nations that are selling to us as suppliers to us,” he said. “One of the great dangers for trade is that since the free trade people are so ideological they do not admit that anything was wrong on any trade agreement so they run the risk of free trade going right down the drain — [which is why] there is all this populism and protectionism.”

To secure better trade deals the Trump administration would pursue a three-point plan which would call for clear cost-benefit analyses, their automatic reopening for possible adjustments after five years and a requirement that other countries implement required changes to laws and other policies at the same time as the US.

Mnuchin’s past and present collegues at Goldman Sachs speak of him as a hard worker, who tends to have a tough, ruthless streak with an intense focus. He was not considered to be particularly sociable or deft at navigating relationships.

“He’s not a people-person or salesman, not at all,” a former colleague recalled, adding that he appeared to have a strong free-market ethos.

.

[kscarbel2]

Trump team questions the almighty dollar

The Financial Times  /  January 17, 2017

Donald Trump has threatened to overturn two decades of US economic policy by questioning the strong value of the dollar, raising fears that his presidency could set off a new round of currency wars between the world’s major economies.

On Monday, Trump appeared to break from the longstanding “strong dollar” policy of successive administrations, declaring that the currency was too high and that this was preventing US companies from competing with Chinese counterparts.

“Our companies can’t compete with them now because our currency is too strong. And it’s killing us," he said in an interview with the Wall Street Journal.

Speaking in Switzerland after Trump’s comments, Anthony Scaramucci, a leading figure in the transition team, said the administration would need to take heed of the problems of a buoyant currency.

“In the Trump administration, there will be a lot of symbolism in terms of reaching out for lower-class families and middle-class families,” he said, adding that in doing so “we have to be careful about the rising currency because of not just what is going on internationally, but it’ll have an impact internally in the US”.

But Scaramucci also suggested that if the new administration could create fast growth, it would allow the US to deal with the tighter monetary conditions that come with a higher currency.

Previous incoming administrations have ritualistically sworn fealty to a strong dollar, saying this was in the interests of the US economy — even when the currency’s value was arguably doing more harm than good at the time. This was part of a broader US strategy aimed at allowing the currency to find its own value rather than trying to micromanage the exchange rate.

With the dollar trading near 14-year highs against a basket of its peers, however, Trump’s team faces a serious barrier to its goal of reducing the US trade deficit.

The danger is that if the US starts suppressing the value of its currency, it could trigger a broader currency war far greater in magnitude than the skirmishes seen in the wake of the 2008 global crisis.

Besides China, such a war would draw in economies in Europe and Japan. It also would mark an unwinding of the longstanding G7 consensus that markets ought to set the value of currencies.

“We haven’t seen anything yet. If the president of the United States begins talking the dollar down, then we will have currency wars and it will make a mockery of the previous things that we thought were wars,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. He argued that Trump could end up unwinding the G7 consensus, triggering instability in financial markets and discouraging foreign investors from investing in US assets.

“This is a case where the stirrings of a currency war could set the ground for a broader trade war,” said Eswar Prasad, a Cornell economist and author of The Dollar Trap.

“It does raise the specter of trade tensions with many of the US trading partners. Once you give up the strong dollar policy and start focusing more on the [level of the] currency it does raise the prospect of bringing to a head many of the trade tensions with key trading partners including Europe, Japan and China.”

Some analysts question the potency of such verbal interventions — especially at a time when Trump’s apparent willingness to advocate deficit-widening tax cuts could bring forward interest-rate increases and add to the dollar’s strength. What’s more, Trump’s decision to criticize Chinese foreign exchange policies seems out of date: recently Beijing has not been seeking to push down its currency but rather to prop it up.

However, C Fred Bergsten, senior fellow at the Peterson Institute for International Economics, said Trump was right to think the strong dollar policy was now misplaced, adding that the US currency was by his calculations overvalued by at least 10 percent. He said the exchange rate might prove the best route towards addressing the deficit compared with alternatives such as throwing the US economy into recession or erecting trade barriers.

“If you could nudge it down through oral intervention, which this is, that is probably less risky than alternative efforts,” he said.

The complication, however, was that Trump’s other economic policies could end up pushing the currency higher.

“Donald Trump comes in having made quite a high priority in reducing the US trade deficit. The question is how is he going to do that — particularly since his own economic policy — tax cuts, stronger growth probably inducing the Fed to tighten more rapidly — is going to make the dollar go up even more.”

That message was echoed by Lael Brainard, a member of the Federal Reserve board, on Tuesday. The governor and rate-setter said that more “expansionary” fiscal policy in the US could increase expectations of a divergence between US and overseas economic conditions and so push the exchange rate higher.

The US has notionally stuck with its strong-dollar mantra since the 1990s, but during the election campaign Trump showed little regard for the policy.

“It sounds good to say ‘we have a strong dollar’. But that’s about where it stops,” he said.

His new interventions recognize that a strong dollar represents one of the main obstacles to his campaign promises to create manufacturing jobs in the Rust Belt states that swept him to power.

“In this one respect at least, Trump is certainly putting economic realism ahead of macho nationalistic bluster,” said Cornell economist Eswar Prasad. “I think he, as a businessman, recognizes the importance of the dollar’s value towards accomplishing what he wants to accomplish, which is trying to preserve US jobs in declining industries.”

[kscarbel2]

Bringing Back Jobs And Growth 

The White House  /  January 20, 2017

Since the recession of 2008, American workers and businesses have suffered through the slowest economic recovery since World War II. The U.S. lost nearly 300,000 manufacturing jobs during this period, while the share of Americans in the work force plummeted to lows not seen since the 1970s, the national debt doubled, and middle class got smaller. To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.

The plan starts with pro-growth tax reform to help American workers and businesses keep more of their hard-earned dollars. The President’s plan will lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate, which is one of the highest in the world. Fixing a tax code that is outdated, overly complex, and too onerous will unleash America’s economy, creating millions of new jobs and boosting economic growth.

As a lifelong job-creator and businessman, the President also knows how important it is to get Washington out of the way of America’s small businesses, entrepreneurs, and workers. In 2015 alone, federal regulations cost the American economy more than $2 trillion. That is why the President has proposed a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations that should be repealed.

With decades of deal-making experience, the President also understands how critical it is to negotiate the best possible trade deals for the United States. By renegotiating existing trade deals, and taking a tough stance on future ones, we will ensure that trade agreements bring good-paying jobs to our shores and support American manufacturing, the backbone of our economy. The President plans to show America’s trading partners that we mean business by ensuring consequences for countries that engage in illegal or unfair trade practices that hurt American workers.

By standing side-by-side with America’s workers and businesses, the President’s policies will unleash economic growth, create 25 million new jobs, and help Make America Great Again.