The aftermath of each presidential campaign brings wildly divergent forecasts about what the inauguration of the new occupant at 1600 Pennsylvania Ave. might mean for the economy.
Just hours after Donald J. Trump was elected this nation’s 45th president, markets around the world experienced wild swings that frightened investors. But in the end, the Dow recovered fully, and the Standard & Poor’s stock index rose. Some analysts attributed the uptick in the markets to a perception by investors that Republicans are more business-friendly than Democrats.
But predictions by economists are just that: predictions. Sometimes they’re spot-on. And sometimes, for a variety of reasons, they’re way off.
That said, here are a few trends in the coming days, weeks and months to watch closely. These trends could help shape the nation’s economic climate in the next four years and beyond.
Infrastructure Investment: It’s no secret that a large percentage of the nation’s bridges, roads and public school buildings are overdue for extensive renovations or replacement. Trump has proposed pumping $1 trillion into public infrastructure investment over time. This proposal has echoes of Franklin Delano Roosevelt’s Works Progress Administration of the 1930s and early ’40s, which created a massive number of jobs and led to the construction of thousands of public facilities around the country.
Investing heavily in infrastructure development in the coming decade could be an added bonus to a still-recovering economy. But as The Wall Street Journal pointed out recently, the road to this ambitious investment could be bumpy, given the fact that the plan relies heavily on a tax break for private sources that would in turn lead to infrastructure financing. Also, many experts believe that having private sources pour money into infrastructure projects in exchange for tax credits will fall short of the amount needed. Then there’s also the concern that spending heavily on infrastructure could lead to higher long-term interest rates.
Gridlock-Free Washington: Although many corporations have awaited the advent of a new administration with a mix of hope and anxiety, there seems to be mostly hope. There’s a sense among many large corporations and lobbyists that they will be able to get more done now that the executive branch and both chambers of the legislature are controlled by the same party. As The New York Times noted shortly after Election Day, the phones of many lobbyists have been ringing nonstop. Such lobbyists and their clients are confident they can work with their allies on Capitol Hill to get rid of or weaken regulations that have impeded their abilities to do business. This could be great news for many investors.
Deregulation: That word is music to the ears of investors and many large corporations. Trump has pledged to roll back parts of the Dodd-Frank financial reform legislation, environmental regulations and labor protections. Such measures would have a huge impact on banks, oil and gas companies, and the pharmaceutical industry. In fact, in recent days, the stock prices of many big companies in these industries have soared.
Of course, the future of the economy is all speculation at this point. January 20, Inauguration Day, still lies eight weeks away. And a lot can happen – or not happen – between then and January 2021.
Dr. Benjamin Ola. Akande is the 21st president of the 166-year-old Westminster College in Fulton, Missouri. He has a Ph.D. in economics and previously served as dean of the George Herbert Walker School of Business & Technology at Webster University.