Investors have, on balance, concluded that the combination of a shift to very expansionary fiscal policy and major reductions in regulation in sectors ranging from energy to finance to drug pricing will raise demand and reflate the U.S. economy.
.. over the medium- and long-term they were catastrophic for the working class in whose name they were launched. This could be the fate of the Trump program given its design errors, implausible assumptions and reckless disregard for global economics.
.. an approach based on tax credits for equity investment and total private-sector participation that will not cover the most important projects, not reach many of the most important investors and involve substantial mis-targeting of public resources.
.. Many of the highest-return infrastructure investments — such as improving roads, repairing 60,000 structurally deficient bridges, upgrading schools or modernizing the air traffic control system — do not generate a commercial return and so are excluded from his plan. Nor can the non-taxable pension funds, endowments and sovereign wealth funds that are the most promising sources of capital for infrastructure take advantage of the program.
.. I am optimistic regarding the efficacy of fiscal expansion. But any responsible economist has to recognize that, past a point, it can lead to some combination of excessive foreign borrowing, inflation and even financial crisis.
.. Many, such as the proposed abolition of the estate tax, will benefit only the high-saving wealthy.
.. The same cannot be said of Trump’s global plan, which rests on a misunderstanding of how the world economy operates.
Consider the immediate effects of Trump’s victory. The Mexican peso has depreciated about 10 percent relative to the dollar over fears of new protectionist policies, and many other emerging market currencies have also fallen sharply. The impact of this change is to raise the cost of anything the U.S. exports to Mexico and to lower the cost of anything Mexico exports to the United States.
.. The plan seems to assume that we can pressure countries not to let their currencies depreciate