Economist: Trump needs to get four things 'very right' to spur growthThe potential is there; president just needs to fill in details, expert says
Congress and President Donald Trump need to "get a few things very right" if they want to breathe life into the tepid national economy, said J.D. Foster, chief economist for the U.S. Chamber of Commerce.
Foster offered a cautiously optimistic forecast Tuesday at the fifth annual economic forecast summit held by the Pennsylvania Bankers Association and Pennsylvania Chamber Educational Foundation.
Trump's election threw a wrench into forecasters' ability to predict what will happen in the next four, or eight, years, Foster said.
Whereas Democratic nominee Hillary Clinton offered detailed, and largely status quo, policy plans during her campaign, Trump ran on a "policy-light" platform that left little but broad strokes for economists to work with, Foster said.
The cautious optimism Foster expressed comes from Trump's promises to prioritize growing the economy. That's a change over the previous administration, he said, where policies, often heavy on regulatory requirements, placed economic growth on the back burner in favor of other issues.
Trump has the benefit of working with an economy with high potential, Foster said. The U.S. has a flexible labor market, entrepreneurial culture, physical resources and other advantages over other countries. These factors should have spelled a more enthusiastic recovery over the past eight years, Foster said.
"We have an A student that's turning in Cs," he explained. Trump, he said, has ample opportunity to fix that.
Still, the president will need to tread carefully as he fleshes out the broad promises of his campaign, which he began to do last night during his first address to Congress.
Foster believes Trump needs to address four key issues if he wants to breathe life back into the economy:
- Address the national debt, especially as interest rates rise.
- Choose the right people to fill vacancies on the Federal Reserve Board. That means choosing people with good reputations who will ease fears in the financial markets, as opposed to people with extreme views who could scare them.
- Stay open to international trade discussions. The country could benefit if Trump follows through on negotiating a better deal for the North American Free Trade Agreement, but the U.S. has a lot to lose if trade is restricted. "If we hide behind behind a wall, we will whither," Foster said.
- Get moving on hiring personnel. Many of the positions responsible for forming and implementing important economic policies are still vacant more than a month into Trump's presidency, Foster said.
Shifting attitudes in state government
Pennsylvania's government also has significant work ahead of it in the economic sphere, said Matt Knittel, who addressed the audience at Tuesday's forecast on behalf of the state's independent fiscal office.
The pending $3 billion budget deficit, including a $1 billion deficit from last year and a projected $2 billion shortfall this year, takes center stage in any debate about the health of Pennsylvania's economy, Knittel said.
Myriad factors led the state to this point of expenditures exceeding revenues. Some of those – like an aging workforce and job growth led by low-paying, low-producing service industries – aren't changing anytime soon.
The good news is that lawmakers seem to finally have a consensus that they need to institute permanent solutions to these problems, said Knittel, whose office provides nonpartisan analysis on budget issues.
"It's a different tone this year," he said. "Things are being looked at very closely."