Economists and financial gurus are now predicting a potential era of economic growth and prosperity under President-elect Donald Trump.
Initially, expert predictions for the economy were grave, with very few economists predicting anything remotely close to positive. More or less, the economy was expected to implode if Trump secured the presidency.
Paul Krugman, opinion writer and economist for The New York Times, wrote that if Trump were to win: “we are very probably looking at a global recession, with no end in sight.” Krugman even went so far as to claim that the markets would “never,” recover. They recovered less than nine hours later. (RELATED: Paul Krugman Says Markets Will ‘Never’ Recover From Trump; Dow Hits Record High)
“If Trump wins, it (the market) should go down 7 percent,” Eric Zitzewitz, economics professor at Dartmouth College, told CNBC.
The Wall Street Journal surveyed 57 economists from academia, business and finance to ascertain how their views of growth, inflation and other economic indicators changed after Trump won the presidency.
Overall, economists thought a Trump presidency would usher in a time of growth.
Economists predict the economy could expand by 2.2 percent in 2017 and 2.3 percent in 2018, the Journal reports. These projections are a marked increase from recent growth rates, as the economy grew at just 1.5 percent in 2015. Inflation is predicted to be 2.2 percent in 2017 and 2.4 percent in 2018, according to the Journal. That would mark the longest stretch of sustained inflation since before the 2007 market crisis.
All of these predictions are marked increases from the same survey given in October a year before the election.
Expectations of a growing U.S. economy are likely due to a few key things.
Trump and Speaker of the House Paul Ryan both have similar tax plans and both have a desire to cut the regulatory burden on business. Tax cuts, in the short term, typically work to boost economic growth. Decreased regulatory burden on businesses would likely increase business and investor confidence, and could result in economic growth. (RELATED: A Comprehensive Look At President-Elect Donald Trump’s Tax Plan)
Business leaders are also supportive of Trump, which likely boosted economists’ predictions about the future growth of the domestic economy.
Business Roundtable, an association of chief executive officers of leading U.S. companies, wrote a letter following Trump’s victory expressing their ardent support. “Business leaders are eager to begin working with the new Administration and incoming Congressional leadership to accelerate economic growth and spur job creation,” the letter read.
The business leaders speak to Trump’s goal of doubling U.S. economic growth during his presidency, saying: “We share that goal and will work with the Trump administration and Congress to help attain it.”
Speaking to his plans to reform the tax code and alter federal regulations, the Roundtable says, “these are key pro-growth policies, critical to new innovation and investment. America’s business leaders fully support these priorities.”
The fear of a Trump presidency for economists largely centered around the theory that he is anti-free trade. There was worry his opposition to NAFTA (he promised to tear it up), the Trans-Pacific Partnership, and other trade deals would cause the U.S. to suffer. International growth would eventually plummet due to repealed or revoked trade deals, and the U.S. economy would soon follow.
The new Journal survey found that fear has shifted away from trade, and is now focused on leadership. Some 65 percent of economists surveyed said the single most likely factor to throw the U.S. economy off course would be missteps in the White House, the Journal reports. Initial fears of a Trump trade war are still prevalent, as it is listed chief among the potential missteps by economists.
Economists predict a one-in-five chance of a recession in the coming year, a figure that has declined over the past three months.
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