He’s allowing the government to run large budget deficits — some of the largest ever outside wartime or recession — in the hopes that this will somehow put growth on a higher trajectory.Irresponsible as that might sound, it actually makes some sense.In the long run, economic growth is a function of two variables: population and productivity.For decades, America had plenty of both. Birth rates were ample, and any additional labor could be attracted from elsewhere.From 1947 to 2007, workers’ output per hour grew at an average annual rate of 2.3 percent.So for the most part, American presidents could focus on improving rather than reviving growth.But since the last recession, the picture has changed. In advanced economies, central banks have the tools they need to fight it.Slow productivity growth, by contrast, has become a real concern, especially as countries seek the resources to take care of aging populations and still invest in their futures.Republicans and Democrats may disagree on the best way to create deficits, whether it be tax cuts and military spending or investments in infrastructure and education. But the balance of risks leans toward trying this experiment.Be it the Trump administration or the next, someone was eventually going to take the gamble.Conor Sen is a Bloomberg View columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.More from The Daily Gazette:EDITORIAL: Find a way to get family members into nursing homesEDITORIAL: Urgent: Today is the last day to complete the censusEDITORIAL: Thruway tax unfair to working motoristsEDITORIAL: Beware of voter intimidationFoss: Should main downtown branch of the Schenectady County Public Library reopen? Categories: Editorial, OpinionPresident Donald Trump is conducting a risky experiment on the U.S. economy. So the whole game becomes a big bet that deficits — created by the government’s tax cuts and spending plans — will boost productivity growth. Treasury Secretary Steven Mnuchin suggested as much last week when he said that the Trump administration’s policies could lead to wage growth without inflation, and that people shouldn’t worry about the forthcoming deficits.Ironically enough, this policy was espoused by the Bernie Sanders campaign (as my colleague Noah Smith has noted).The idea is that by running the economy hot and making labor more expensive, the government can induce businesses to do more investment than they would in a normal economy.Ever since the financial crisis, a weak economy has discouraged businesses from investing, leading to weaker productivity growth — so why not try the opposite? It’s a theory that hasn’t been tested in recent decades, but an intriguing one.What are the potential risks and rewards? Sticking with the status quo promises more of the same underperformance — annual real GDP growth of about 2 percent. The deficit experiment has two possible outcomes.In the best case, the U.S. gets some form of productivity miracle. In the other, rising inflation forces the Fed to raise interest rates to cool off the economy, triggering a recession.Most policymakers, economists, and investors aren’t worried about a period of inflation like what the world experienced in the 1970s. Labor-force growth is slowing as baby boomers retire. For a variety of reasons, some understood and some not, productivity has decelerated as well.The Obama administration largely accepted the new reality: In a 2016 report, it projected inflation-adjusted gross-domestic-product growth of just 2.2 percent for the next decade, and offered fairly traditional ideas such as immigration reform, more cross-border trade, infrastructure spending and education investments.Trump has taken a very different approach, aiming for annual growth of 3 percent over the next decade.This certainly won’t come from population, particularly given his administration’s attitude toward immigration.That leaves productivity, which some of his policies don’t do much to encourage, either.Tariffs on imports such as steel and aluminum will serve largely to make output more expensive.Tax cuts might prompt companies to make more productivity-enhancing investments, but the effect will likely be modest given uncertainty about how long the cuts will remain in place.
UAE’s oil giant ADNOC has decided to step up its efforts and produce more oil, pledging to increase supply to over 4 million barrels per day in April 2020 following the collapse of the OPEC+ agreement and the oil price war between Saudi Arabia and Russia.Source: ADNOCIn a statement on Wednesday ADNOC Group CEO, Dr. Sultan Ahmed Al Jaber, said: “In line with our production capacity growth strategy announced by the Supreme Petroleum Council, we are in a position to supply the market with over 4 MMBPD in April. In addition, we will accelerate our planned 5 MMBPD capacity target.”ADNOC also said it would provide better forward visibility to its customers and that it would shortly announce forward prices for the months of March and April 2020.“This decision has been made to ensure that our customers have visibility of the price so they can plan accordingly,” ADNOC CEO said.“As announced in November 2019, ADNOC remains firmly committed to moving from its current retroactive pricing mechanism to a new forward pricing mechanism for its flagship Murban crude oil. This will be traded on a new independent exchange, ICE Futures Abu Dhabi (IFAD), which is expected to launch after the necessary regulatory approvals are obtained.”ADNOC’s decision to boost oil output comes after OPEC and Russia last week failed to agree on further production cuts in order to cope with falling global oil demand as a result of coronavirus outbreak.OPEC suggested the extension of oil production cuts until the end of the year and further cuts until June 2020, but Russia refused to support this plan pushing OPEC to remove all limits on its own production, Reuters reported last Friday.As a result, oil prices suffered a historic collapse last Monday after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.With the decision to increase output, UAE’s ADNOC has joined the state-run Saudi Aramco which, according to Reuters, plans to raise capacity to 13 million bpd from 12 million bpd.Offshore Energy Today StaffSpotted a typo? Have something more to add to the story? Maybe a nice photo? Contact our editorial team via email. Also, if you’re interested in showcasing your company, product, or technology on Offshore Energy Today, please contact us via our advertising form where you can also see our media kit.