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What’s the Trump effect on the economy?

We asked four local financial experts to weigh in on the president’s economic campaign promises, the outcomes and where the nation is headed.

Posted online

President Donald Trump didn’t mince words on the campaign trail – if elected, he would turbocharge U.S. economic growth.

Frequently, he put forth promises of 4 percent gross domestic product growth, to “do a big number on the Dodd-Frank Act ” and cut overall current regulations by 75 percent, and spend $1 trillion on infrastructure improvements. The goal setting continued post election. During the 45th president’s inaugural speech, Trump promised to create 25 million jobs over the next decade – the most of any president in history.

Following his election, Wall Street roared with excitement and the market hit multiple records with anticipation for Republican control of the White House and both legislative chambers. In the National Federation of Independent Businesses’ December survey, the portion of business owners who expected better conditions going forward jumped to 50 percent from just 12 percent the month earlier.

Now, six months into his presidency, Americans have seen little traction on Trump’s most aggressive – and supporter rousing – campaign promises.

Springfield Business Journal checked in on some of the president’s top pledges:

•  Released July 28, GPD grew at an annual rate of 2.6 percent in the second quarter, according to the U.S. Bureau of Economic Analysis.

• Trump signed an executive action Jan. 30, ordering that for every one new regulation issued, federal agencies must identify two existing regulations to be eliminated. He also directed the Treasury to prepare a report on changes to the Dodd-Frank Act. A bill already has passed the House and sits in the Senate.

• Trump proposed reducing permitting time for some infrastructure projects from 10 years to two years, according to WhiteHouse.gov, with $200 billion in funding pledged.

• A meeting is slated Aug. 16 to discuss the North American Free Trade Agreement, in which the president recently has softened his tune to 20 percent from the proposed 35 percent tariff on Mexican goods to pay for a border wall.

With little meaningful legislation to speak of – though the executive order pen has been historically busy – and seemingly ever-moving targets, SBJ editors asked local experts about the new president’s impact on the economy. Here’s what they had to say.

—Emily Letterman, Features Editor


  Jeff Layman
principal and chief investment officer at BKD Wealth Advisors LLC

What’s President Donald Trump’s biggest economic impact so far?
Most of the positive effect has been felt in the stock market in anticipation of some of the changes the administration may make. I suppose one area investors focus on is deregulation. There have been some things that have begun there that positively impacted the banks. If you look at those share prices since Election Day, they have probably benefited more than any other group.

The other areas of interest are No. 1, in our view, the potential for corporate and individual tax cuts. Infrastructure spending is another that has a much longer horizon on it, so there hasn’t been a whole lot happening. There has been more anticipation of change than actual change, so far.

On the tax overhaul …
The whole trade-off with tax cuts is the immediate impact on the federal budget is less revenue. In order for that to really prove beneficial, you have to have an increase in economic activity. When you think back to some of the ideas expressed in the campaign, we were looking for some fairly significant tax cuts. The likelihood is, if there are tax cuts, they will be more moderate. There was a time where the thought was potentially reducing corporate tax rates from 35 percent to 15 percent. I don’t expect anything anywhere near that extreme. It seems as we get deeper and deeper into this year, all of this becomes a lot less likely for 2017 than it does for 2018.

On $1 trillion in infrastructure …
There is a lot of need for upgrades; it’s aging. But like everything else, it’s a pretty aggressive spend target and it’s got to be financed somehow. You look at all these things we are talking about and they all have a revenue of expenditure impact. You’ve got to come up with those funds somewhere. The goal would to be not to do it through debt financing. That tends to be a slower area to put into place. The source of funding is not obvious.

On being aggressive …
The ideas as expressed probably always start out with the goals being more aggressive. The political process tends to bring those back to the middle. If you start with $1 trillion and bring that back to $500 million, that’s still a success.

—Emily Letterman, Features Editor


  Brian Fogle
a former longtime banker and current president of the Community Foundation of the Ozarks

What’s President Donald Trump’s biggest economic impact so far?
Obviously, legislation being passed hasn’t happened yet on a lot of things, but I think the financial markets certainly have rewarded his pro-business talk, stance and even some of his executive orders. Bank stocks have had a great run since November in anticipation of fewer regulations and maybe some scaling back of the Consumer Financial Protection Bureau.

I think it’s not maybe from legislative action as much as it is Republicans typically being seen as more pro-business. Having majorities in both houses and a Republican president, the markets have rewarded them very well.

As profits come in for this second quarter, they are coming in very strong. Consumer sentiment is also very high. There is a perception out there of a pro-business climate.

On 4 percent GDP growth …
I think that is going to be a very hard goal to attain. We just saw a revision this past quarter of 2.6 percent and that is strong. I just finished a book called, “The Rise and Fall of American Growth,” by Robert Gordon, and he goes into a whole bunch of reasons we are not going to see the growth we saw in the 1950s and 1960s. It’s because of changing demographics and political situations. We had a lot of rebuilding and manufacturing from World War II and the smaller labor force helped drive up wages. There were a lot of things contributing to that growth that aren’t happening now.

On the NAFTA overhaul …
It’s interesting, although a Republican, and Republicans have typically been very pro free trade, he’s gone against that more populist Republican ideal. To get something like that changed, there is still only so much you can do with executive order. I don’t think he would have a great deal of support from his party for that. When we have tried to restrain trade, it may show a short-term gain, but long term, countries are worse off.

On the market reaction …
One of the things interesting to watch is if there will be a decoupling eventually from the markets to the political situation. Right now, we just had a very challenging week for the White House with all the controversies going on, yet the market continues to go up and up. In past years, when there has been political negativity out there, the market reflects that. I don’t remember a time where you’ve had all this controversy coming out of Washington, D.C., that seemingly has no impact on the financial market. I don’t know if that can continue. I think sooner or later confidence in the financial markets will sway.

On the Trump bump …
It’s a reflection of not only the president, but also majorities in both houses. Republicans are always seen as smaller government, few regulations and pro-business. Then you have other strong economic indicators. Inflation has yet to come back, which means interest rates stay low. There are a lot of favorable indicators right now for economic growth.

On creating 25 million jobs …
Locally, we are beyond full employment right now. A couple of weeks ago, since we started keeping economic record of job openings, we hit an all-time record. I think the limiting factor there is more of the job force than it is the jobs. We are hearing that locally, from employers, they can’t find people for the available jobs. At this point in time, jobs haven’t been near the issue as a quality workforce. To do that, we have to invest in job training, in higher education but are we willing to do that and make those commitments? I see that as more limiting.

—Emily Letterman, Features Editor


  Eric McClure
CEO of Mid-Missouri Bank and former bank commissioner for the Missouri Division of Finance

What is President Donald Trump’s biggest economic impact so far?
Trump is certainly pro-business. While the specifics of what he has done is not really evident, maybe, the talk and the general attitude to try to help businesses instead of impede business is making a difference.

On bank deregulation talks …
The previous administration piled on a lot of regulations. Some were necessary, but I used to be part of government, and government goes too far. There’s a buck being put out there every time somebody has to comply with a regulation. If it’s necessary, and there’s a good bang for the buck, we’ll do it. A lot times, there’s not. We’re putting a lot of businesses out of business because of suffocating regulation, and banks are no different. When I started my career in 1980, there were 14,000 banks in this country. Today, there’s barely 5,000 and they’re disappearing fast. In 2008, there were nearly 7,000. We got caught up in overregulation zeal.

On Trump’s intent to give Dodd-Frank a “very major haircut” …
There are some things they can do that are pretty easy. There are some things that are pretty hard once the train leaves the station in Washington to push back. Like most laws, they start with a basically good and worthy cause, but when you put government bureaucracy over it, it gets totally out of control. (The Consumer Financial Protection Bureau) was established with basically a blank check; the budget was over $600 million this past year. The director is accountable, basically, to nobody. His mission was pro-consumer, which is not a bad thing, but (then) it was anti-banks and financial instructions to a large degree.

On the next Federal Deposit Insurance Corp. chairperson …
They’ve announced a leading candidate for that. [Editor’s note: Trump picked top congressional staffer James Clinger, but last month he reportedly asked the White House to withdraw his nomination.] I’m a former bank regulator and I feel strong that safety and soundness is a primary need. But you also need to have streamlined and effective rules and regs, and not just a crushing overburden.

—Eric Olson, Editor


  Terry Conner
senior vice president of financial planning at Financial Engines Advisors LLC

What is President Donald Trump’s biggest economic impact so far?
Most of the things he has proposed really haven’t been enacted yet. “Obamacare” hasn’t been repealed and we haven’t seen any tax reform yet, although that may still be in the offing later on this year. I think he has encouraged businesses to be growth oriented – that’s probably more from rhetoric than from any policy.

On Trump’s desired tax overhaul …
It might be something more of a temporary tax cut, which is usually what we see. The goal of a tax reform is to spur economic growth.
But one of the things all legislators are having to deal with is if we cut taxes, how are we going to keep that revenue neutral. The latest number I saw is the planned tax cuts would reduce revenue by $5 trillion. How are you going to make up that? Is it through economic growth or the elimination of certain deductions or tax loopholes?

To cut the corporate income tax rate, from roughly 35 percent down to 15 percent, including for small businesses, in theory would leave more money for investment dollars. People who are against that say that might create pass-through entities and instead of investing those dollars, people might just pocket them. You’ll probably have to tie that lower corporate tax rate with companies performing in a manner that will create new jobs. I think it will be incumbent upon the Republican Party to demonstrate how lower taxes will in fact benefit America as a whole, particularly the middle class, to creating jobs. They’re going to have to put some type of cause and effect in the legislation.

On presidents taking credit for Wall Street …
Presidents will take credit for stock market activity if it’s positive, but how much we can tie to a person and their agenda is questionable.

What we can say is since he was elected president Nov. 9, the Dow is up about 20 percent. Since he was inaugurated, it’s up 10.5 percent. Can we say that was due to one president? The intellectual answer is probably no.

Wall Street likes pro-growth policies that encourage business investment and job growth, which will lead to higher stock prices.

For example, his proposal to let companies repatriate their overseas dollars at a 10 percent tax rate could restimulate business and investment in the United States.

—Eric Olson, Editor

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