NOURIEL ROUBINI
What impact will the next US administration have on economic growth and inflation? The answer is not yet clear, because while some of President-elect Donald Trump’s proposed policies would boost growth and reduce inflation over time, others will have the opposite effect.
On the positive side of the ledger, Trump will be pro-business overall, and this fact alone could stimulate economic activity by unleashing the “animal spirits” that drive business investment, innovation, and growth. Growth should also benefit if he and congressional Republicans succeed in permanently extending the corporate and personal income tax cuts that will expire in 2025. Equally, if the potential excesses of his deregulatory agenda are kept in check, a reduction of bureaucratic red tape could promote growth and encourage competition, reducing prices over the longer term.
Trump also wants to boost America’s oil and gas production by the equivalent of three million barrels per day, which could reduce energy prices and make domestic energy-intensive sectors more competitive. But one hopes this can be done without phasing out most of the previous administration’s subsidies to green energy.
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