A Trump Economy Is a Bad Economy, UCLA Economic Forecast Says
The well-regarded UCLA Anderson Forecast is a cheat sheet for shifting economic conditions in the country in the years to come, in this case 2017 and 2018. But the forecast had to undergo a remix recently. You see, the September edition was based on the assumption that Hillary Clinton would win the presidency. If you remember, polls at the time pointed that way.
Now that Trump is president-elect, the economists behind the forecast had to make some revisions. And they're not pretty. The new version assumes the real estate mogul will cut taxes for the ultra-rich and for corporations. "Make no mistake, this is real or even reckless fiscal stimulus," UCLA senior economist David Shulman writes in the revised forecast. "The federal deficit will roughly double to over $1 trillion by 2018."
The forecast assumes that under a Trump administration, the Federal Reserve will increase the cost of getting a bank loan, which could slow down Americans' ability to buy homes, cars and goods. The UCLA forecast predicts that, under Trump, the Fed will take interest rates to 2 percent by late 2017 and 3 percent by late 2018.
Housing construction could flatline. UCLA has downgraded its forecast for construction of new housing units in 2017 and 2018 from 1.4 million to about 1.2 million.
What's more, Trump's tough-on-trade policy could "trigger modest retaliatory actions" that could dampen aircraft and farm production, Shulman writes. And he argues that mass deportation would slow the current pace of economic growth, taking perhaps millions of key consumers out of the game.
While Trump's promise of infrastructure improvements could bring spending and jobs to the nation, the economist states that he doubts they can gain congressional approval.
Ironically, California, which by and large has been opposed to Trump and his policies, could benefit from the president-elect's saber rattling. If defense spending increases, San Diego and the Bay Area could cash in on shipbuilding, according to UCLA senior economist Jerry Nickelsburg.
However, the Golden State is essentially at full employment, and any Big Government stimulus such as defense spending or infrastructure expenditures might require the importation of workers, Nickelsburg writes. "This will lead to increased demand for homes, pushing housing prices higher," according to a summary of the UCLA report. Just what we need as California faces a housing crisis.
As many as half of the state's farmworkers, in an industry that supplies much of the nation with its food, could be deported, according to Nickelsburg. Agricultural concerns then would have to pay higher wages in an attempt to replace them, Nickelsburg argues.
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In L.A. County, home to the nation's largest port (Los Angeles and Long Beach combined), a trade war with China and Mexico could cost 24,000 jobs or more, according to the revised forecast. However, UCLA economist William Yu writes that he believes such economic hostility is unlikely.
If many of L.A. County's 1 million undocumented people are deported, the result could be "a smaller supply of low-skilled workers and, in turn, an increase in wages for the remaining low-skilled workers," according to the summary. But the local economy could ultimately take a hit.
"To be sure, if the new administration follows through with its campaign rhetoric to engage in mass deportations, job growth and the economic activity associated with it would be far slower than what we forecast,” Shulman writes.
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