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Views on the Economy and the World

A blog by Jeffrey Frankel

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For Academic Citation:Views on the Economy and the World,” http://www.belfercenter.org/publication/views-economy-and-world.

244 posts

Outlook for 2017

| Jan. 03, 2017

Five journalist’s questions about the economic outlook in the New Year and my answers: In the first year of Trump’s presidency, what do you predict for the US economy in 2017?The US economy is currently at or near full employment, for the first time in 9 years.  So there is limited capacity for an acceleration of growth in the medium term.  Mr. Trump is fairly likely to follow through with his proposals for massive tax cuts and spending increases (which the economy needed 5 years ago, but were blocked by Republicans).

A year-end summing up of where we stand is harder than usual this time!I have recently spoken: on “Global Economic Challenges for Donald Trump,” (outline; slides: Ppt, pdf) on a panel at the American Enterprise Institute, Washington, DC, Dec. 5, 2016. Summary & video. And on “An Economy That Works for All Americans” (slides: ppt, pdf)  to the Bipartisan Program for Newly Elected Members of Congress, Institute of Politics, December 7, 2016. And  on “Trade and Inequality,” (slides: Ppt, pdf) at the  Providence Committee on Foreign Relations, Dec.

We unexpectedly find ourselves in uncharted territory, in so many ways. The United States has never before had a president with no political or military experience. And Donald Trump is especially unpredictable: he has so often said things that conflict with other things he has said. So it is hard to know what he will do.But a possible precedent for what the Trump presidency may look like sits in plain sight: the George W. Bush presidency. To be fair, the Bush family clearly did not support Trump’s campaign.

370 of us economists have signed a new letter opposing Donald Trump:  Economists Lay Out List of Reasons to Vote Against Trump.   Here is the text of the letter, which the Wall Street Journal has reported on .The WSJ earlier surveyed all previous members of the President’s Council of Economic Advisers, spanning eight presidential administrations, Republican and Democrat.  Not a single one supported Trump, including the Republicans!Also 19 Nobel Laureates have signed a letter endorsing Hillary Clinton.

My preceding post, “The Fed and Inequality,” observed that populists have historically favored easy money and low interest rates.  I mentioned William Jennings Bryan’s campaigns for the presidency in the 1890s as well as the supply-siders in the early 1980s who blamed the failure of Reaganomics to produce sufficient growth on Paul Volcker’s efforts to fight inflation with tight monetary policy.An interesting dimension concerns gold.  Bryan’s proposed reform for allowing easy money was to take the US off of the gold standard, most famously in his 1896 “cross of gold” speech.

The Fed and Inequality

| Oct. 28, 2016

Populist politicians, among others, have claimed in recent years that monetary policy is too easy and that it is hurting ordinary workers.   But raising interest rates is not the way to address income inequality.It is a strange claim for anyone to make, but especially for populists.  Low interest rates are good for debtors, of course, and bad for creditors. Throughout most of US history, populists have supported easy monetary policy and low interest rates, to help the little guy, against bankers, who had hard hearts and believed in hard money.

Why Vote? Follow-up

| Sep. 29, 2016

My preceding blogpost — “A Radical Solution to the Fundamental Flaws in US Politics: Vote!” — received several objections from readers to the effect that I had failed to address the paradox of voting, or “Downs Paradox” (particularly at the Econbrowser site).That was a deliberate choice on my part.  I suspect that most people understand this issue instinctively, even the non-academic public who are not familiar with the phrase.Yes, it is true that it is not rational to take the time to vote… if you are a homo economicusnarrowly defined as someone whose utility function includes solely his or her own economic consumption, i.

The train of American electoral politics has gone further and further “off the rails” in recent decades.  A number of suspected culprits have been identified as the specific fundamental flaw in the system that needs to be fixed.  Gerrymandering.   Campaign finance.  Economic inequality.  “False balance” in the media.  It is strange that the public debate gives so much attention to these four explanations — and a few others like them. Those diagnoses don’t offer a ready remedy that is in the hands of the people.

One can’t blame the Financial Times for publishing an opinion piece by Wilbur Ross, if he is indeed a senior policy adviser to Donald Trump (“Trump campaign benefits from criticism of trade imbalances,” 29 August).   It is hard to judge the Republican candidate’s positions from his own words, because of his famous “shoot from the lip” style.   Does Trump really believe, for example, that American workers’ wages are too high, as he said in the Republican debates?   Many had been waiting to see who his economic advisers would be, in part so that we could have clear and precise language by which to judge what are the candidate’s positions.

 This year’s US presidential election campaign differs radically from past patterns, including in the departure of the Republican nominee from many of the policy positions traditionally taken by his party.  Examples are his lack of support for international trade, military alliances, or the institution of marriage.   But when Donald Trump released some positions on tax policy recently, the differences with Hillary Clinton’s proposals fell very much along usual party lines.  His is the kind of tax policy that has long been favored by Republican presidential candidates and congressmen:  tax cuts that overwhelmingly benefit the rich and that are not accompanied with any plans to pay for them.