Analysis: Trump’s Plans Would Cause ‘Lengthy Recession,’ Cost Jobs
According to a new report by Moody’s Analytics, a Donald Trump presidency would cause a “lengthy recession” and significantly damage the economy.
“The economy will be significantly weaker if Mr. Trump’s economic proposals are adopted. Under the scenario in which all his stated policies become law in the manner proposed, the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office,” the report said.
“By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%, compared with below 5% today. During Mr. Trump’s presidency, the average American household’s after-inflation income will stagnate, and stock prices and real house values will decline.”
The Hill reports:
The new study attempts to analyze Trump’s plan similar to how agencies like the Congressional Budget Office calculates the economic impact of plans offered by the president or Congress. Moody’s said it would soon be applying the same test to proposals from Hillary Clinton, the presumptive Democratic nominee.
However, Moody’s did note that analyzing Trump’s plans was “complicated,” in large part due to the lack of specificity from the campaign. As such, the analysis includes some assumptions, but Moody’s did say they were based on information provided by the Trump campaign.
Moody’s tested Trump’s plans under three scenarios: one in which Trump is taken at face value and his plans are enacted exactly as he has described, a second where his policies are adopted but at a more modest level, and a third where a skeptical Congress scales back Trump’s plans due to “political realities.” Moody’s described the third as the most likely case if Trump were elected.
But even under that scenario, Moody’s predicted the U.S. economy would effectively freeze under Trump and job growth would be roughly halved from its current pace.
If Trump’s plans are fully enacted, Moody’s said the U.S. economy would dive into a recession that would last over two years — longer than the downturn caused by the financial crisis, although less severe. Trump’s policies would also slash U.S. job growth by 3.5 million jobs compared to the current trajectory.
Trump’s call for broad tax cuts across income levels, while limiting some deductions, would drive up the deficit without dramatic spending cuts elsewhere, Moody’s warned. And Trump has not indicated he wants to significantly alter the nation’s entitlement programs, making those cuts hard to come by.
On immigration, Moody’s warned that even if Trump were able to deport millions of illegal immigrants, it would slash the size of the country’s labor force and many of the new job openings will not be filled, harming businesses. Higher labor costs will drive up the prices of products.
In its report, Moody’s acknowledged that oftentimes policy proposals offered on the campaign trail are politically driven, and elected officials often change course after winning office. But even under that lax standard, Moody’s described his proposals as “fiscally unsound” and do not see a way they can boost the economy.
“The upshot of Mr. Trump’s economic policy positions under almost any scenario is that the U.S. economy will be more isolated and diminished,” the report stated.
The report was prepared by Mark Zandi, chief economist at Moody’s Analytics. Zandi served as an adviser on Sen. John McCain’s (R-Ariz.) 2008 presidential campaign and has also analyzed the Obama administration’s economic policies. He is also a donor to the Clinton campaign. Three other Moody’s economists also worked on the analysis.
A Trump spokesperson did not respond to a request for comment. However, a person close to the campaign told The Wall Street Journal that Trump’s policies have not been fully fleshed out and argued the plan would be more effective than Moody’s predicts.
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