LONDON, Sept 14, (RTRS): The US economy could be $1 trillion smaller than otherwise expected in 2021 if Republican candidate Donald Trump wins the presidential election in November, economics research firm Oxford Economics said on Tuesday.
While the firm said Trump’s policies — including more protectionist trade measures, tax cuts and mass deportation of illegal immigrants — may be watered down in negotiations with Congress, they could have “adverse” consequences.
“Should Mr. Trump prove more successful in achieving adoption of his policies, the consequences could be far-reaching — knocking 5 percent off the level of US GDP relative to baseline and undermining the anticipated recovery in global growth,” it said.
Oxford Economics describes itself as an independent global advisory firm. It is headquartered in Oxford, England, but has offices around the world, including in Chicago, Miami, Philadelphia, San Francisco and Washington.
The Trump campaign did not immediately respond to a request for comment on the research. At a campaign event in Clive, Iowa, on Tuesday, however, Trump reasserted that he would grow the US economy.
He vowed to revive the country’s manufacturing sector by preventing US companies such as Apple Inc from making products overseas, renegotiating global trade accords and slashing federal taxes and regulations.
“We’re going to provide opportunity, prosperity and security for all Americans,” Trump said.
Under its baseline scenario, Oxford Economics expects US gross domestic product, the value of all goods and services produced in the economy, to grow at a fairly constant rate of around 2 percent from 2017, reaching $18.5 trillion in 2021.
But if Trump is elected and succeeds in implementing his policies, it predicts growth would slow significantly, falling near zero in 2019, and reducing overall GDP to $17.5 trillion.
Oxford Economics said its baseline scenario assumes Trump’s Democratic opponent Hillary Clinton triumphs in the Nov 8 vote and a split Congress emerges — between a Republican US House of Representatives and a Democratic US Senate — which results largely in a continuation of current policies.
Trump would face challenges winning the backing of Congress for all his policies, and some economists argue that looser tax policy could actually help boost economic growth.
The latest opinion polls show Clinton, the former secretary of state, ahead, but her lead has slipped in recent weeks.
Republican presidential candidate Donald Trump said on Monday that US Federal Reserve Chair Janet Yellen was keeping interest rates low because of political pressure from the Obama administration, questioning the motives of an institution whose work hinges on maintaining its independence.
“Well, it’s (the interest rate) staying at zero because she’s obviously political and she’s doing what Obama wants her to do,” Trump told CNBC in a phone interview, saying Yellen should be “ashamed” of what she was doing to the country.
The US central bank has raised interest rates just once since cutting them to zero in response to the 2008 financial crisis. The Fed has indicated it is preparing for a second hike of 0.25 percentage point, although it has signaled the pace of future rate rises will be slower than in the past.
“Any increase at all will be a very small increase because they want to keep the market up so Obama goes out and let the new guy … raise interest rates … and watch what happens in the stock market,” Trump said.
He did not specify how the Democratic president had put pressure on Yellen.
While Yellen has met with Obama, the Fed as an institution is independent when it comes to raising or lowering rates, and both Yellen and other rate-setters have said the Fed has no view on the Nov. 8 election.
The Fed’s Washington-based board had no comment on Trump’s remarks, though regional Federal Reserve bank presidents said during public appearances that politics do not enter into Fed deliberations.
Minneapolis Federal Reserve President Neel Kashkari responded in a later interview on CNBC by denying that politics influenced Fed policymaking.
“Politics simply does not come up,” he said. “We look at the economic data and … everyone around the table is committed to achieving our dual mandate” of maximum employment and stable prices, Kashkari said.
Atlanta Fed President Dennis Lockhart, asked about political pressure on the Fed at a National Association for Business Economics conference in Atlanta, said, “I don’t see the world that way.”
Trump’s comments mark a back-and-forth by the candidate over whether he feels low rates are good or bad. He has accused the Fed of keeping rates low at Obama’s behest, but at other times has said he felt lower rates were good because higher rates would make the dollar stronger, hurting American exports and manufacturers.
As a businessman, he said, “I love low interest rates,” but said they hurt many people who were living on their savings.
Typically, Fed officials steer clear of politics in their public remarks, and argue that doing so is important for the Fed to maintain the independence it needs to set monetary policy.
The moments when the line is publicly breached, such as former Chair Alan Greenspan’s endorsement of a Bush administration tax cut, are rare and can provoke a quick backlash.
Though the members of the Fed’s Board of Governor’s are appointed by the president with Senate confirmation, their long, 14-year terms and staggered appointment dates are designed to insulate them from the sort of pressure Trump alleges.
The chair, considered one of the most powerful positions in setting US economic policy, is picked from the board members for a four-year term. Yellen’s would expire in 2018, and Trump has previously said he would consider replacing her.