Trump and the Economy

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Has the economy experienced a “Trump Bump? Arizona State University economist Lee McPheters will talk about what impact Donald Trump’s presidency has had on the economy.

TED SIMONS: COMING UP NEXT ON ARIZONA
HORIZON, WHAT IS A TRUMP BUMP,
AND HOW IS IT IMPACTING THE
ECONOMY?
ALSO TONIGHT, CLASSES ARE ABOUT
TO BEGIN FOR THE FIRST TIME AT
THE MAYO CLINIC SCHOOL OF
MEDICINE IN SCOTTSDALE.
AND WE'LL TAKE YOU TO A LOCAL
OCEAN OF LIFE ART EXHIBIT.
THOSE STORIES ARE NEXT ON
ARIZONA HORIZON.
GOOD EVENING.
TED SIMONS: I'M TED SIMONS.
PRESIDENT TRUMP HAS BEEN IN
OFFICE FOR SIX MONTHS.
HOW HAS THE ECONOMY RESPONDED.
AND THE SO-CALLED SIGNS OF TRUMP
BUMP, HERE TO DISCUSS THE
ADMINISTRATION'S IMPACT ON THE
ECONOMY IS LEE MCPHETERS ASU'S WP SCHOOL OF
BUSINESS.
LEE MCPHETERS: GOOD TO BE HERE.
TED SIMONS: WHAT IS THE TRUMP BUMP?
LEE MCPHETERS: I THINK THERE WAS
EXPECTATIONS THAT THE ECONOMY
WOULD PERHAPS TAKE OFF ON A NEW
TRAJECTORY WITH THE INAUGURATION
OF DONALD TRUMP.
BUT WHAT WE HAVE ACTUALLY SEEN
IS TWO DIFFERENT AFFECTS.
ANALYSTS TRACK WHAT THEY CALL
THE SOFT INDICATORS.
AND THESE ARE TYPICALLY SURVEYS,
CONSUMER CONFIDENCE SURVEYS,
BUSINESS OPTIMISM SURVEYS,
EXPECTATIONS BY INVESTORS, AND
THOSE INDICATORS HAVE REALLY
BEEN STRONG EVER SINCE THE
ELECTION REALLY.
AND THAT CONTINUED ON INTO THE
FIRST QUARTER.
WE STILL SEE A LOT OF OPTIMISM
IN THIS ECONOMY.
SO THAT'S YOUR SOFT INDICATORS.
WHAT REALLY MEASURES WHAT'S
HAPPENING IN THE ECONOMY, OF
COURSE, ARE THE HARD INDICATORS.
AND THAT WOULD BE JOB GROWTH,
WHICH HAS BEEN PRETTY GOOD.
VERY GOOD.
222,000 JOBS JUST IN THE LAST
REPORT.
SOME OF THE OTHER INDICATORS,
YOU KNOW, THAT WE THOUGHT WOULD
PERHAPS GIVE US A BETTER READ,
GROSS DOMESTIC PRODUCT HAS NOT
REALLY CHANGED MUCH.
IN FACT, IT'S HAVE BEEN FAIRLY
ANEMIC.
WE'VE SEEN AUTO SALES WEAKEN.
WE'VE NOT REALLY SEEN BUSINESS
CAPITAL INVESTMENT INCREASING,
ALTHOUGH THE STOCK MARKET HAS
BEEN PRETTY STRONG.
YOU CAN ARGUE THAT WHILE WE'RE
TRYING TO CHANGE THE DIRECTION
HERE OF A GIANT OCEAN LINER, AND
IT'S GOING TO TAKE A WHILE.
OR YOU COULD SAY, WELL, TWO
QUARTERS NOW AND WE'RE STILL
WAITING.
TED SIMONS: YEAH, NOT MUCH OF A BUMP.
TED SIMONS: I KNOW THAT THE FIRST
QUARTER, 1.4% GROWTH, YOU
MENTIONED ANEMIC.
THAT SOUNDS PRETTY ANEMIC.
I THINK FORECASTERS ARE LOOKING
AT 2% FOR THE YEAR.
THE PRESIDENT SAID 4% ANNUAL
GROWTH, IS WHAT HE PROMISED.
LEE MCPHETERS: WELL, I WILL TELL YOU WHY
THAT'S NOT THE EXPECTATION OF
ECONOMISTS.
FIRST OF ALL, WHAT TO THEY
EXPECT?
WE WORK WITH BLUE CHIP ECONOMIC
INDICATORS, A NATIONAL PANEL OF
ABOUT 50 WALL STREET CORPORATE
FORECASTERS.
WE JUST GOT THEIR MOST RECENT
OUTLOOK FOR 2017.
THERE'S NO FORECAST AT ALL FOR
GDP OVER 2.5 % GROWTH.
AND THE VAST BODY OF FORECAST IS
2.2%.
I THINK THAT, YOU KNOW, IF
YOU'RE GOING TO VEGAS AND THEY
HAD OPPORTUNITIES TO BET,
SOMETHING IN THE RANGE OF 2.2 OR
2.3 WOULD BE WHERE WE'RE GOING
TO BE FOR 2017.
NOW, WHY DON'T WE HAVE 4%?
BECAUSE I THINK A LOT OF
ANALYSTS WILL TELL YOU TO LOOK
AT THE SUPPLY SIDE.
THAT IS, WE HAVE PRODUCTIVITY
GROWING AT ABOUT 1%.
WE HAVE THE WORKFORCE GROWING AT
ABOUT 1.5, SOMETHING IN THAT
RANGE.
WE HAVE BASIC CORE GROWTH THAT'S
THE COMBINATION OF THOSE TWO.
SO UNLESS THERE ARE SOME SHOCKS
TO THE SYSTEM, YOU'RE REALLY NOT
GOING TO BE SEEING 4% GROWTH
UNTIL WE HAVE SOMETHING IN THE
RANGE OF 2% PRODUCTIVITY GROWTH,
WHICH IS OUT OF REACH RIGHT NOW,
I THINK.
TED SIMONS: WHY IS IT OUT OF REACH?
YOU MENTIONED THE DOW, AT OR
NEAR RECORD HIGH.
GAS PRICES ARE DOWN.
THE LATEST JOBS REPORT, THAT WAS
PRETTY ENCOURAGING AS WELL.
YOU MENTIONED ALL OF THESE SOFT
KIND OF THINGS HERE, AND YET
CONSUMER SPENDING, AUTO SALES,
THEY'RE NOT DOING SO WELL.
WHY THE DISCONNECT?
LEE MCPHETERS: NOW YOU'VE PULLED US OVER TO
THE DEMAND SIDE.
LOOK AT CONSUMERS FOR EXAMPLE.
EVER SINCE THE CONCESSION IN
CONSUMERS HAVE BEEN VERY
CAUTIOUS.
THEY'RE SIMPLY NOT BORROWING THE
WAY THEY WERE BEFORE.
THERE ARE CONSUMERS THAT HAVE A
LOT OF DEBT, IT'S REALLY IN TWO
COMPONENTS.
ONE IS STUDENT DEBT, WHICH IS
REALLY A DRAG, LONG-TERM KIND OF
DEBT.
THE OTHER KIND OF DEBT THAT
WE'RE DEALING WITH IS AUTO
PURCHASES.
THE MARKET HAS BEEN REALLY
STRONG.
THAT'S WHERE THE CONSUMERS HAVE
BEEN WILLING TO BORROW.
OTHERWISE, ARE THEY USING THEIR
HOUSES AND ATM?
WE DON'T SEE.
THAT WE SEE CAUTION, I THINK, ON
THE PART OF CONSUMERS WHO ARE
REALLY BADLY HURT IN THE
RECESSION.
THEN YOU HAVE THE BUSINESS
SECTOR.
ARE THEY GOING TO UNDERTAKE
CAPITAL INVESTMENT?
THEY'RE STILL CAUTIOUS.
ARE THERE GOING TO BE TAX
REFORMS?
ARE THERE GOING TO BE SOME MACRO
POLICIES THAT ARE PUT FORTH THAT
STRENGTHEN THE ECONOMY?
WE HAVEN'T SEEN THEM YET.
THEREFORE YOU HAVE A CAUTIOUS
BUSINESS SECTOR.
THEN YOU LOOK AT GOVERNMENT.
GOVERNMENT IS NOT GOING TO BE
DRIVING GROWTH IN THIS ECONOMY.
FINALLY, YOU COME TO EXPORTS.
WE'RE STILL WAITING FOR OUR
TRADING PARTNERS TO SHOW A
LITTLE BIT BETTER GROWTH.
YOU KNOW, GERMANY, FRANCE, THE
EURO.
TED SIMONS: WE HAVE A WEAKER DOLLAR.
IT'S GOOD IN ONE SENSE, BUT IT
KIND OF SHOWS WHAT PEOPLE ARE
THINKING ABOUT US AS WELL.
LEE MCPHETERS: A WEAKER DOLLAR IS GOOD FOR
EXPORTS.
SO THAT, IN A SENSE, IS
POSITIVE.
THE OTHER SIDE OF IT IS: WHY IS
THE DOLLAR WEAK?
SIMPLY BECAUSE, I THINK, THAT
THERE IS LESS EXCITEMENT ON THE
PART OF OTHER COUNTRIES NOW ON
THE OUTLOOK FOR THE U.S. ECONOMY
LONGER TERM.
TED SIMONS: INTERESTING.
LEE MCPHETERS: DOLLARS ARE NOT DEMANDED AS
MUCH RIGHT NOW.
TED SIMONS: WHAT ABOUT THE HEALTH
INSURANCE PREMIUMS, MEDICAL
COSTS?
THAT SORT OF THING, HOW MUCH IS
THAT A DRAG ON THE ECONOMY?
LEE MCPHETERS: WELL THERE'S AN ARTICLE HERE
WE ALL SAW ON THE INTERNET AND
SO FORTH.
BANNON'S WHITE BOARD.
DO YOU REMEMBER THAT?
TED SIMONS: YES.
LEE MCPHETERS: HE HAD HIS LIST OF IMPORTANT
ITEMS, INITIATIVES, THAT HE
WANTED TO PURSUE.
AND WHEN THEY BLEW THAT UP AND
LOOKED AT WHAT WERE THE
INITIATIVES, ONE OF THEM WAS, OF
COURSE, REPEAL AND REPLACE OBAMA
CARE.
HERE'S THE PROBLEM WE HAVE NOT
ONLY IN THE COUNTRY HAS A WHOLE
BUT RIGHT HERE IN ARIZONA.
ONE OUT OF FIVE NEW JOBS IN
ARIZONA LAST YEAR WAS IN HEALTH
CARE, AND THAT WAS STIMULATED BY
THE MEDICAID EXPANSION,
GOVERNMENT INVOLVEMENT IN
MEDICARE, DIFFERENT PROGRAMS
SUPPORTED BY GOVERNMENT
SPENDING.
EVEN THOUGH PRIVATE SECTOR
SPENDING IS STRONG THERE.
SO WE HAVE A COMPONENT OF THE
ECONOMY THAT INSTEAD OF BEING
STABLE AGAIN IS UNDER A CLOUD OF
UNCERTAINTY.
MY EXPECTATION IS THAT ONCE WE
SEE THE WHOLE HEALTH CARE
INITIATIVE AT THE FEDERAL LEVEL
FINALLY GET RESOLVED, WE'LL GO
BACK TO SEEING THAT HEALTH CARE
IS ONE OF THE DRIVERS OF GROWTH
IN ARIZONA AND ACROSS THE
COUNTRY.
IT'S JUST THE WAY -- YOU KNOW,
THAT'S ONE OF THE THINGS
CONSUMERS WANT THESE DAYS.
THEY ARE WILLING TO PAY FOR
BETTER HEALTH CARE.
TED SIMONS: BUT LET'S STICK WITH ARIZONA.
WE TALKED ABOUT HEALTH CARE, BUT
OTHER ASPECTS OF THE ECONOMY
THAT MIGHT BE FEELING OR NOT, A
TRUMP BUMP?
LEE MCPHETERS: WELL, DEFENSE WOULD BE NUMBER
ONE.
ARIZONA IS ONE OF THE TOP TEN
STATES FOR BENEFITTING FROM
FEDERAL DEFENSE SPENDING.
WHEN YOU LIST OUT THE TOP
COUNTIES IN THE NATION THAT
BENEFIT FROM DEFENSE SPENDING,
PIMA COUNTY IS RIGHT THERE.
MARICOPA COUNTY IS RIGHT THERE.
THAT IS AN IMPORTANT CONTRIBUTOR
TO ARIZONA GDP.
SO TO THE EXTENT THE TRUMP
AGENDA ACTUALLY INVOLVES GREATER
LEVELS OF SPENDING, THIS IS
GOING TO BE GOOD FOR ARIZONA.
SOME OF THE AREAS THAT ARE LESS
APPEALING WOULD BE CHANGES TO
TRADE, ANYTHING THAT SLOWED DOWN
ARIZONA'S EXPORT ACTIVITY AND
CROSS-BORDER ACTIVITY WOULD
PROBABLY NOT BE GOOD FOR THE
STATE.
THEN, OF COURSE, COMING BACK TO
HEALTH CARE, ARIZONA HAS, I
BELIEVE, THE LAST NUMBERS I SAW,
28% OF THE OUR POPULATION IS ON
MEDICAID.
ANYTHING THAT CUTS BACK, THEN,
ON MEDICAID, YOU KNOW, WE'RE NOT
LIKE WEST VIRGINIA, BUT WE'RE
ONE OF THE STATES THAT REALLY
DEPENDS ON THAT FOR HEALTH CARE.
TED SIMONS: AS FAR AS GROWTH IS
CONCERNED, AND MAYBE BORDERLINE
STIMULUS SPENDING -- DON'T WANT
TO USE THE WORD STIMULUS IN SOME
CORNERS -- BUT SPENDING, EVERY
TIME I HEAR ABOUT RISING
INTEREST RATES, I THINK
INFRASTRUCTURE IS GOING TO BE
THAT MUCH HARDER TO COME AROUND.
LEE MCPHETERS: FIRST OF ALL, I THINK WE
MISSED THE BOAT ON
INFRASTRUCTURE EXPANSION WHEN
INTEREST RATES WERE REALLY LOW
BECAUSE WE KNOW THAT THE
BRIDGES, THE ROADWAYS, YOU KNOW,
TRAINS AND AIRPORTS AND SO
FORTH, YOU KNOW, THE ENTIRE
INFRASTRUCTURE IS LAGGING BEHIND
THE REST OF THE WORLD AND IS
GOING TO NEED REPAIRS,
ENHANCEMENTS, AND SO FORTH.
INTEREST RATES ARE PROBABLY
GOING TO BE HIGHER A YEAR FROM
NOW THAN THEY ARE NOW.
SO IN A WAY WE'VE KIND OF MISSED
THE BOAT ON THAT.
THE INTERESTING THING -- AGAIN,
THIS IS MY ANALYSIS -- THE WHOLE
TRUMP INFRASTRUCTURE PLAN IS
SOMEWHAT OF A PAPER TIGER IN
THAT THE PROPOSAL OF $1 TRILLION
IN SPENDING, WHEN YOU ACTUALLY
ANALYZE IT, FIRST OF ALL, THAT'S
OVER TEN YEARS.
SECOND, WHEN YOU LOOK AT IT, 800
BILLION OF THAT IS EXPECTED TO
BE PRIVATE SECTOR THROUGH
VARIOUS DEALS AND ARRANGEMENTS
WITH GOVERNMENT.
NOW, IF WE CAN PULL THAT OFF,
THAT WOULD BE GREAT, BUT SOMEHOW
THIS SEEMS TO BE SOMETHING THAT
HAS NOT WORKED WELL BEFORE.
SO THE FEDERAL CONTRIBUTION TO
THE CURRENT INFRASTRUCTURE PLAN
IS 200 BILLION, AND YOU SPREAD
THAT OVER TEN YEARS, THAT'S 20
BILLION A YEAR, WHICH IS NOT
VERY MUCH, AND THEN YOU LOOK AT
THE AMOUNTS THAT IS ON THE BOOK
FOR 2018.
THAT'S -- THAT'S $5 BILLION.
THAT'S NOT GOING TO BE MUCH.
WE NEED THREE TO FOUR TIMES MORE
INFRASTRUCTURE TO GET US TO
WHERE WE WANT TO BE.
I WOULD NOT EXPECT TO SEE
INFRASTRUCTURE AS A DRIVER OF
JOB GROWTH COMING FROM THE
FEDERAL LEVEL, AT LEAST.
TED SIMONS: INTERESTING.
INTERESTING STUFF.
GOOD CONVERSATION.
GOOD TO HAVE YOU HERE.
THANKS FOR JOINING US.
LEE MCPHETERS: GOOD BEING HERE, TED.
TED SIMONS: THIS IS ARIZONA HORIZON.

Lee McPheters: ASU Economist

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