US business economists worry about the prospects for US President Donald Trump’s policy agenda, and the potential damage to the economy from his trade and immigration policies, a survey released yesterday showed.
The survey’s findings add to Trump’s accelerating alienation with the business community. CEOs fled his advisory councils last week to distance themselves from his both-sides-are-to-blame response to a white supremacist rally in Virginia in which one woman among a group of counterprotesters was killed.
Although the survey was completed more than a week prior to the those events, they reflect growing concerns among businesses that had been cheered since the election about the possibility of seeing tax reform and infrastructure spending that could boost the economy.
“I do think that is some of the concern, that everything that has transpired recently, especially over last week, may impair the administration’s ability to get its legislative agenda passed,” National Association for Business Economics (NABE) policy analyst Frank Nothaft said.
The administration has a number of very important legislative proposals that could stimulate growth and boost spending, but “with everything that’s transpired it puts that legislative agenda at jeopardy. Will anything get passed?” Nothaft said, adding that he was not speaking for the NABE panelists in the semi-annual policy survey.
While the survey showed most economists judge fiscal policy to be “about right” currently, they are “quite pessimistic about prospects for ‘meaningful, revenue-neutral tax reform’ in the near term,” the survey showed. Conducted from July 18 to Aug. 2 with 184 members, the survey showed only a 10 percent probability of such legislation this year and a 15 percent (median) probability of passage next year.
More than half the respondents said tax reform could add less than 1 percentage point to real GDP growth over the next 10 years, while a third put the impact on growth at between 1 and 2 percentage points.
Business economists also worry about the “unfavorable consequences” of Trump’s trade an immigration policies.
In those areas “survey participants give the administration unfavorable scores,” said NABE policy survey chair Richard DeKaser, who also is executive vice president and corporate economist at Wells Fargo.
Nothaft, chief economist at CoreLogic, said that anything that clouds the environment for businesses to make investment decisions, whether for exports or imports, can cause firms to delay spending and impact the economy.
When policies are “in flux and the environment can change dramatically, companies may hold back,” he said, adding that “investment is an important part of GDP and economic growth.”
Meanwhile, restrictions on immigration hurt companies that are having trouble finding workers, notably in homebuilding and high-tech.
On monetary policy, Nothaft said the survey shows economists now have a “much stronger belief” compared with six months ago that the US Federal Reserve would raise the benchmark interest rate one more time this year.
While 61 percent said monetary policy was “about right,” 53 percent were expecting a third rate hike, NABE said, although there is less agreement about next year.
In contrast, market economists have become increasingly doubtful about the prospects for another move, which was expected in December, given persistently low inflation even amid historically low unemployment rates. Even central bankers are divided about how fast to move rates.
However, 67 percent expect Trump to replace Fed Chair Janet Yellen when her four-year term ends on Feb. 3.
About half expect White House economic adviser Gary Cohn to replace her, although the survey was completed before this week’s rumors — denied by the White House — that Cohn was planning to resign.
Most economists see only a 10 percent chance the US Congress will fail to take action to raise or suspend the limit on government borrowing, before the US defaults on its debts. The government is expected to hit the debt ceiling in the middle of next month.
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