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

New JLL England chief plans autumn rethink

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Targett commits to Saints

first_img “Being a Southampton supporter, it means a lot more to be staying at the club because it’s where I want to spend my career,” Targett told Southampton’s official YouTube channel. “I want to get into the first team and to keep progressing by playing week-in week-out. “Ryan Bertrand is doing a great job this season and has made that left-back spot his own, so I just need to keep working hard in training to keep pushing him.” Press Association Matt Targett, the latest left-back off Southampton’s production line, has penned a five-year deal with his boyhood club.center_img The 19-year-old has impressed since breaking into the first team this season, with his debut coming in August’s Capital One Cup defeat of Millwall. Targett has been rewarded with a new deal until 2019 at a club which has seen Gareth Bale, Wayne Bridge and Luke Shaw flourish after being given a chance at left-back. last_img read more

After World Cup wink| How Sir Alex Ferguson dealt with Ronaldo & Rooney on first day back at Man Utd.

first_imgCRISTIANO Ronaldo and Wayne Rooney shook hands in Sir Alex Ferguson’s office on the first day back in training for Manchester United after the 2006 World Cup, Gary Neville has revealed.The United team mates were involved in an infamous clash at the World Cup in Germany, where Rooney was sent off after stamping on Ricardo Carvalho in England’s quarter-final defeat to Portugal.Ronaldo attracted anger in England after running to the referee to lead the Portugal protests that Rooney should be dismissed, then was caught on camera winking at the team benches after the forward was given his marching orders.This could have led to friction in the Old Trafford dressing room, although former United defender Neville said Ferguson acted immediately to nip any problems in the bud when the players returned for pre-season training ahead of the 2006-07 season.Speaking on Sky Sports , Neville said: “First day back in training, I was called into the office with Wayne and Cristiano by the manager, he wanted to see if there were any problems, any hangovers.Former Manchester United Manager Sir Alex Ferguson“They were actually really good friends, they used to socialise – Patrice Evra, Rio Ferdinand, Cristiano and Wayne were very close to each other.“Because the whole of the country was against him (Ronaldo), it did feel like a David Beckham-type moment in our dressing room. There was this thing about England and Manchester United, with England fans having a go at the United players, there was no love lost anyway.“When Beckham came back in 1998 everyone at United rallied around him, and it was the same with Cristiano in 2006, and it helped him go and prove everybody wrong.“It was the first morning of pre-season, they shook hands, there was no problem whatsoever. To be fair, Wayne is knowledgeable enough to know that on a football pitch, anything goes – we had the same mentality at United. Cristiano was trying to win for his country, Wayne would not expect anything different and neither would I.”Ferguson’s peacekeeping efforts were richly rewarded, as United won the Premier League title in 2006-07, the first of three in a row for a side featuring Ronaldo and Rooney in their forward line.Ronaldo was a key figure in all three title victories before moving on to Real Madrid in the summer of 2009 in a then-world record £80 million ($100m) transfer. ( read more