Trump owns a solid economy

President-elect Donald Trump is poised to inherit a healthy economy when he takes office in January. By almost all measures, the American economy is doing very well. Gross domestic product rose 2.8% year-on-year last quarter, inflation is roughly below the Federal Reserve’s target of 2%, and unemployment is historically low. So what does that mean for the incoming president and his administration?

“The Market” host Kai Ryssdal spoke with Greg Ip, chief economic commentator at The Wall Street Journal, about his article on why the current economy is so strong and whether economic conditions can change how during the next presidency. Below is an edited transcript of their conversation.

Kai Ryssdal: You say at the beginning of this article, what is more interesting than the economic growth we have in this country is its “quality”. What does it mean?

Greg Ip: The United States has grown rapidly in the past year, certainly faster than other major developed countries. And while it is growing rapidly, this has happened as inflation has fallen and productivity per worker has risen. So, this tells us that growth does not grow by restricting economic power, which can cause inflation. This kind of increase means that the Fed would feel comfortable continuing to lower interest rates, making it less likely for us to go lower.

Ryssdal: And we, you say, are foreigners, right? Europe and the rest are struggling a bit.

Ip: That’s right. If you look at the last year or two, the United States has grown faster than almost all of its peer economies. When you dig into the numbers, the main reason is because manufacturing is growing so fast in the United States, which seems to reflect the few natural gifts the US has that others don’t, like resources. Ours is a lot of energy and very powerful technology. sector, which can be seen in the amazing performance of companies like Nvidia and Apple.

Ryssdal: So let’s talk about the nuts and bolts. What does this mean? Based on the news of the day, the news of last night I think, what does this mean for President-elect Trump?

Ip: Well, I think the first thing it means is that Trump has a very good economy. He has the wind behind him. There is no reason to think that there is a recession in the next year or two. And based on what we know now, inflation is unlikely to be a big problem. Inflation seems to be on a downward trend from here, and that seems to be why the stock markets were relatively strong during the election.

Ryssdal: However, as many analysts and economists have said, the policies of the presidential candidate are relatively high.

Ip: So, let’s take a look at how we can expect the economic outlook to change under President-elect Trump’s policies. The two main components of his platform are high rates and low taxes. And economists will tell you that higher taxes, all else equal, will lead to higher inflation, and that lower taxes, equal, will lead to faster economic growth and lower deficits. larger government. And if you look at how the stock market reacted to the election news, that’s what they expect. But I think it’s very important to emphasize that we don’t know for sure what will happen. Trump himself has been vague on exactly what he plans to do in terms of tariffs or taxes, and of course, some of these proposals have to go through Congress, and we’re still waiting to find out The full composition of the Congress will have what will be its vote.

Ryssdal: We know that presidents are given undue credit and undue blame for what happens in the economy. Do you see anything that will change the course of the American economy?

Ip: I think even before the election, it was clear that the next decade or so will be a time when inflationary pressures will be more of a problem than in the decade before this pandemic. Before the pandemic, inflation and interest rates were low around the world, in part because it was the long tail of the global financial crisis, which had investment and demand. I think the next 10 years will be very different. We are not forgetting the global financial crisis. Everywhere people are worried about supply chains because of things like pandemics, things like climate change, things like political conflicts, so I think that’s an environment where inflation can be a problem. pass the minimum, and that has been true regardless of who has been president. I think that actually affects how policies like tariffs and tax cuts are going to be adopted, and I think that’s an issue that President-Elect Trump and his team are going to have to deal with as well.