Experts see payoffs and perils in Trumpenomics

Donald Trump vowed to dramatically shift America’s economic priorities and performance, claiming his plans will boost wages, jobs and profits while spurring growth from sluggish to rapid.

Will they?

Trump argued that reshaping trade policy will bring manufacturing jobs back and bolster American wages. Some critics warn that could lead to a trade war, higher prices and a global recession. He vowed to slash regulation, cut taxes and spend more on infrastructure, all spurring growth but potentially bringing higher deficits and interest rates.

Amid last week’s stunning political events, the AJC asked several economists for their thoughts on the regional and national economy and on financial markets:

Roger Tutterow

Economics professor, Kennesaw State University

“I think it will be an administration that is focused on pro-growth,” said Tutterow, in part by pushing through tax cuts and infrastructure spending.

“He will run the risk of increasing the deficit,” said Tutterow. But one way to pay for infrastructure investments may be through a special tax deal to encourage multinational corporations to repatriate overseas profits at a discounted tax rate. Such a levy could pay for a lot of roads and bridges, he said.

Obamacare is an issue for many businesses, but Tutterow expects more of a re-tooling than a trashing. Revisions might include increasing the current 50-employee threshhold at which employers are required to provide health insurance, for instance.

“I think it will be about reforming what exists. I think it will be difficult to roll back something that size.”

Emily Sanders

Managing director, United Capital Financial Advisers of Atlanta

“Volatility has come back strong, but it is like the experience of Brexit,” Sanders, referring to Britain’s surprise vote to leave the European Union, said of the effect on markets.

“Within a few weeks, the volatility had disappeared. History has shown that after an election volatility tends to increase and then decrease after investors have time to digest the news. The way I see it, there are some strong positive forces in the U.S. economy… Wages have been rising, unemployment is low.”

Another factor is the pace of change, she said.

“How quick will the policies change? For some things, there are executive orders. For some things, it really takes more than one person… What we are telling clients is that there’s no reason to change their strategy at this point. We are looking at a holistic picture, looking at the clients’ life goals. We do not want clients to have a knee-jerk reaction.”

Gregory Price

Economics professor, Morehouse College

Price said Trump will have to tread carefully on immigration. Without inexpensive immigrant labor, costs will rise for hotels, restaurants, home construction and lots of other industries.

“You’ve got winners and losers,” he said. “It could affect our living standards in the short run.”

Meanwhile, the decline in traditional manufacturing has been a key reason one of Trump’s core constituencies — white, high school-educated males — have faced declining real wages for decades, he said.

“They feel a great distance from Washington. They feel left out,” Price said. In rural Georgia agriculture-related businesses and manufacturing are “the old-time industries that put food on the table for middle class workers, both black and white,” he said. “If (Trump) doesn’t want to be a one-term president, he will have to tend to these class divide issues.”

Alan Levenson

Chief U.S. economist, T. Rowe Price, New York

"Trump's trade threats — to Mexico and China — may be no more than opening ploys to secure concessions. But the risks of miscalculation would be high and could lead to very damaging trade wars — which could have a negative impact across the U.S. economy, not just limited to those areas directly linked to international trade," Levenson said.

“I am not aware of any country in history that ever isolated its way to prosperity.”

He said tighter borders could unintentionally slow growth.

"If we slow immigration of working-age adults, there's not enough growth in the rest of the U.S. workforce or the overall productivity rate to grow the economy very fast. Most of our net population growth comes from immigration."

Rajeev Dhawan

Director of the Economic Forecasting Center, Georgia State University

“The big economic question is: Will the malaise in investment spending by large corporations that has … restrained job creation end as one part of the political uncertainty got resolved? Spending today is job growth tomorrow,” Dhawan said.

“Can manufacturing come back? At least on the auto side, there will be a re-thinking. Should we go out of the country or should we remain in this the country? If they remain, then Georgia is the prime location.

“The textile jobs, the toy factories, the low-quality production jobs are not coming back. What we can get are high-skill, high-quality jobs – cars, planes, specialized steel. But it is not very labor intensive. It will be capital intensive.

Said Dhawan: “One big uncertainty has been resolved and it has morphed into other uncertainties.”

Jeffrey Humphreys

Director of economic forecasting, UGA

With the GOP controlling the White House and Congress, lawmakers’ drought of activity will likely end, said Humphreys.

“Less gridlock in Washington. That’s a big deal,” said Humphreys. “As the world changes, policies need to change, and gridlock has impeded that for a long time.”

Less gridlock could mean more uncertainty and possibly slower economic growth initially, he said, as businesses, households and financial markets wait to see what Trump’s new policies will be on taxes, regulations and other issues.

The uncertainty “will dissipate,” he added. “If we get better policies, it could bring substantial benefits in the end.”

But Trump’s campaign promises on trade and global currency issues could result in trade wars and “a more isolated U.S. economy,” he said. “Importers and exporters have to be concerned.”

Adrian Cronje

Partner and chief investment officer, Atlanta-based Balentine

“I will say, putting aside the politics, that we feel there is now a bit more of an opportunity to lean into stocks rather than bonds. The economy has been improving. Long term interest rates were starting to increase. The corporate earnings recession that has been going on for some time now has appeared to be ending. Oil prices have stabilized.

“Of course we were aware of a chance for a surprise,” Cronje continued. “The electorate here seems to have fallen into haves and have-nots and this really goes back to the great financial crisis and the inadequate recovery since then. Many people out there have not had an increase in real wages for seven or eight years. They feel [persuaded] that the benefits of free trade have not helped them or even that they have been hurt by free trade. And meanwhile … economic growth has been slow.

“I know it’s trite to say so, but the markets do like certainty. What happens with the Federal Reserve and between Trump and the Fed, this is the thing that could rattle the markets the most.”

Ian Bremmer

President, Eurasia Group, New York

Trump's stated intention of reducing foreign commitments and involvements is a concern, Bremmer said.

“Since the 2008 economic crisis, it’s been increasingly clear that the world is heading into profound … geopolitical recession, a G-Zero world as I’ve called it, where there’s an absence of global leadership.

“In short, a Trump presidency means the most significant hit to American power and leadership globally since the collapse of the Soviet Union. It does not necessarily mean the U.S. will decline as a marketplace per se — (b)ut America’s footprint as the world’s leader, and the role of Americanization in a globalized world, is now past the point of no return.”