After tax cuts and increased spending measures have passed through Congress, business economists are expressing optimism that there will be accelerated economic growth over the next two years. This is according to a survey conducted by the National Association for Business Economics. NABE projects that the economy will grow 2.9 percent this year, the best growth in the past three years. Just three months ago NABE was predicting only 2.5 percent growth.
NABE updated their prediction after Trump’s $1.5 billion tax cut passed through Congress successfully and legislatures agreed to raise the budget for military and domestic programs by $300 billion over the coming two years.
NABE forecasters believe that the tax cut and spending increase will increase economic growth by 0.45 percent this year, and 0.3 percent next year.
“In large part, the increase in growth prospects appears related to federal fiscal policies,” said David Altig, chairman of the NABE forecasting group and the director of research for the Federal Reserve Bank of Atlanta.
Trump officials claim that the administration’s economic policies will speed growth to annual rates of at least 3 percent. Most economists doubt this is possible. Many analysts believe that economic growth is more likely to be about 2 percent per year for the next ten years.
A survey conducted by the National Association for Business Economics showed that Hillary Clinton is the preferred candidate for president of the US by 55 percent to an embarrassing 14 percent for Donald Trump. As a matter of fact, Trump was not the second choice. Third party Libertarian candidate Gary Johnson had more support than Trump, with 15 percent saying they would prefer to see him as president. An additional 15 percent said they did not know or had no opinion.
The survey was conducted from July 20 to August 2 and included the views of 414 members of NABE.
Some of Trump’s policies seem to be contributing to his lack of support. Whereas Trump says he would like to nullify or severely restrict the North American Free Trade Agreement, 65 percent of business economists say US trade policy should be even more open and free versus only 9 percent who agree with Trump that trade should be more protectionist.
Trump has expressed a desire to deport illegal immigrants, but the NABE survey showed that only 8 percent agreed with that sentiment, while 64 percent said they would like to see a program to legalize undocumented immigrants who already live in the US.
When asked whether they agreed that “China will face a debt crisis within the next few years,” 52 percent said yes, 25 percent said no, and 23 percent were undecided.
“The biggest concern that has been in discussion is the housing boom and bust in China,” said Jack Kleinhenz, NABE’s president and chief economist at the National Retail Federation. “I think it’s just an overexpansion like we’ve seen in other housing bubbles that have occurred, here in the United States and elsewhere.”
Problems brewing in the Chinese economy include a weakening housing market, expanding debt on the local government level, and a squeezing of supervision of shadow-banking services.
Not all agree with US economists however. Changyong Rhee of the International Monetary Fund said in April that he does not see a full-blown financial crisis for China on the horizon. Kleinhenz added that even if there were a housing bust in China it “shouldn’t have an impact globally” like the housing crisis in the US did. That housing crash helped ignite the 2008 global financial crisis.
The NABE survey was given to 47 member of NABE and was conducted from May 8-21. The economists were also asked about European economics. The vast majority, 84 percent, said that they believe the problems facing Russia and Ukraine “will hinder the economic recovery in Europe.” Whether the crisis will impact the US, however, only 34 percent think it will.
There is good and bad economic news. The bad news first: economists are now predicting dawdling growth during 2013, with an upswing in the unemployment rate back to over 8 percent for at least the first half of the year.
Yes, there is some good news to assuage the bad: the recovery of the housing industry is heading upwards more quickly than expected and there is a very high likelihood that the economy is not about to fall over a “fiscal cliff.”
NABE is an organization composed of business economists and other professionals who use economics in the workplace.
The survey was conducted during the 12 days between September 14 and 26. The best news issuing from the survey concerns the expectation that new housing starts for single-family homes will rise by 23 percent, totaling 750,000 new units for 2012, and a continuing rise in 2013 of about 13 percent, for a total number of units of 850,000.
Home prices are also expected to rise by 1.5 percent in 2012, and 2.8 percent in 2012. This is a higher estimate then the economists gave back in the May survey.
It also seems we are not heading for a fall of a “fiscal cliff.” Despite concerns of the budget deficit and national debt and what the combined $1.2 trillion in spending cuts and tax increases will do to the economy, most economists seem to believe that a giant fiscal explosion will not take place.
‘‘The panelists’ projections for the fiscal cliff are very diverse, though survey respondents in general do not expect the potentially large negative outcomes of the fiscal cliff to materialize,’’ said Shawn DuBravac, chief economist at the Consumer Electronics Association, who analyzed the results for the NABE.