An Economy on the Verge of Take Off?
“We are sitting on the precipice of one of the greatest periods of innovation we’ve ever seen,” Brian Wesbury, chief economist at First Trust Advisors, Wheaton, Illinois, recently told the MSCI Aluminum Products Conference 2016. It was the most upbeat take on the U.S. economy that an MSCI audience had heard in quite awhile. “I think the economy is about to accelerate,” Wesbury told the audience at The Breakers in West Palm Beach Florida. “We should have a good environment for the next five to eight years.”
He attributed his optimism to the Trump victory, which he said has the potential to help kick start “the most amazing turnaround” because of three of the President-elects main campaign promises which “should shrink the size of government, which is really the only way to grow faster.” Wesbury pointed to Trump’s promises to “repeal and replace large parts of Obamacare, get massive tax cuts including reducing the corporate rate to 15%, and impose major easing of the regulation of business.”
It was in large part his endorsement of the small-government economic policies at the heart of the Republican Party’s agenda. “The only way for this economy to grow faster is to shrink the size of government,” he said.
He conceded, however, that he was primarily optimistic for tax reform “on the corporate side because it is going to simply be easier.” Reform on individual tax rates, a critical goal for the many MSCI member businesses that report income on personal tax returns, he said, might be more difficult. “They’ll do the corporate part first,” he said.
His smaller government advocacy did not extend to the Defense Department, however. He was quite confident that military spending would and should increase. And he was less confident that the widely publicized Trump pledge to spend a lot more money on infrastructure projects would be the huge engine of growth that so many, including other conservative economists, are predicting. “It’s not going to be as big as most people think,” he said. “And it’ll be harder as well. There will be more money for infrastructure, but there is a real question about how much gets spent quickly. There are just not that many shovel-ready projects out there.”
Wesbury was quite skeptical about the impact of Trump’s professed enthusiasm for tighter trade restrictions and higher tariffs. “I don’t think that NAFTA was a huge awful thing,” he said. “We have fewer manufacturing jobs today because of technology, not because others have been stealing them. Tariffs are not the right solution because you can’t change one price without changing other prices in the marketplace. China does need to be handled,” he added, “but we have to be careful how we do it or we will wind up harming consumers.”
The First Trust economist insisted that “technology is the growth engine and savior of us all.” Cloud computing and big data will likely have the biggest influence, he said. But the shared economy, innovations like Airbnb for example, will figure strongly in the next wave of growth. “It is incumbent on all of us to recognize the impact of this tech revolution,” he said. “We’ve got to all be thinking about how to use technology to increase productivity.”