Trump’s gamble on the economy might make sense

first_imgHe’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.last_img read more

Gold Coast beach house offers dream lifestyle

first_img10 Albatross Ave, Mermaid Beach.Other features include a lift, basement parking for six cars, work shop and surfboard/bike room. Mr London said there was also an opportunity to buy the adjoining block to secure a double block.The property is on the market at $3.65 million. 10 Albatross Ave, Mermaid Beach.A gatehouse entry welcomes guests to the three-storey residence while floor to ceiling windows create a sense of style. “Situated on a rarely available position, this as new, refurbished residence is a statement in rare style and sophistication that establishes the ultimate living environment for the largest of families,” agent Ron London said. More from news02:37International architect Desmond Brooks selling luxury beach villa19 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago 10 Albatross Ave, Mermaid Beach.The ground floor is an entertainer’s dream with a huge open-plan living and kitchen area leading out to a deck, covered alfresco area and lap pool. The timber veneer kitchen has a marble island bench and Miele appliances. Also on this level is a media room.The first floor features three bedrooms and a study while a master retreat on the second floor comes with its own luxury ensuite, walk-in wardrobe and adjoining entertaining area. 10 Albatross Ave, Mermaid Beach. 10 Albatross Ave, Mermaid Beach is on the market at $3.65 million.ENJOY a relaxed beachside lifestyle in this stunning Mermaid Beach abode on sought-after Albatross Ave.From the street the property stands out with a mix of clean lines, stone and tropical gardens. last_img read more