- Welcome back.
Another big issue thatdrives voters to the polls
is the economy and jobs.
Andrew Root with RegentUniversity's School of Business
joins us now to talk aboutthis important voter issue.
- Thank you, Mike, I appreciate it.
- Yeah, thanks for your time.
First of all, how strongis the economy, really,
and how much of that is acredit to President Trump?
- Great questions.
The economy is very strong by any measure:
unemployment, job growth, income growth,
productivity, any measureyou wanna look at right now,
the economy is strong.
Exceptions might be in housing,
where things are a little bit softer.
Most of that credit,
versus what we saw inthe prior eight years,
does need to go to the President.
The reason is, he has engaged
in regulatory reform and fiscal reform.
People know about the taxes,
but the regulatory side of the changes
have been very significant
to getting business productivity going
and really freeing upbusiness investments,
so the acceleration we'veseen and the growth rate,
and the state of the economy today,
really is attributablea lot to what's happened
in the last couple yearswith fiscal policy.
- What sways people morein an election year,
a good economy or a bad economy?
- I think it's clearly a bad economy.
People are much moreadverse to pain and loss
than they are to gains.
I think the economy had beengrowing into the 2016 election,
and yet there was stilla desire for change
that superseded what wasgoing on with the economy.
Right now, though, theeconomy is better than it was,
so it will somewhat motivating to people,
but it's not quite as motivating
as if the economy were actuallyin recession at this point.
- How long will this expansion last
until we could see,possibly, another recession?
- Yeah, that is an excellent question.
That is really up to the Federal Reserve.
What's been happeningin the last month or so,
is that the stock market,which is a leading indicator,
has been much more volatile.
The reason it's been much more volatile
is that people are concernedthat the Federal Reserve
will raise interest rates too far.
And for people who are getting a mortgage,
for people who haveCapital One or Discover
as their credit card provider,they realize that credit
has gotten tighter in the past month,
and that's gonna lead to a deceleration
in the economic growth rate coming
in the first quarter of '19.
That doesn't mean that wehave to go into recession.
The natural state of theUS economy is growth.
It grows much more often than it shrinks.
Having said that, if the Federal Reserve
does continue to raise interest rates
all the way through 2019as they have advertised,
then there's a reasonable chance
we would have a recessionthe second half of 2019.
If they become more data-dependent,
if they just follow what'shappening in the economy
and what they're reading with people,
then I think this expansioncan go on for a long time.
- Well, let's break thisdown in practical terms.
How has this stronger economy
affected the paychecks of people?
- Yeah, and that's reallywhere I think, probably,
from the perspective of the election,
that's the most salient issue.
Right now you've got incomegrowing 3.1% year over year.
That's the best resultfor individual paychecks
since the financial crisis in 2008,
so individuals are feeling more cash flow,
they're feeling more discretionary income
than they've felt in over a decade.
- Let's talk tariffs, now.
There's been talk that these new tariffs
by President Trump will hurt the nation.
What are your thoughts on the tariffs?
- Yeah, I think, in general tariffs
are akin to a tax increase
in that the cost has to getpassed through somewhere,
but there are benefits to tariffs.
In the early 1980s, PresidentReagan instituted quotas
for foreign automakersthat lead to what is now
a pretty robust manufacturing sector
for foreign automakers in the US.
So the long game in tariffs
can be a little bit more beneficial
and I think capital markets
give the President some leeway on that.
I think the uncertaintyin general, though,
is something that getspriced in capital markets,
so while we're in this period
of uncertainty and negotiation,
that is gonna cost a littlebit more to raise money,
that will cost a fewbasis points of growth
off the economic growth rate, but overall,
it's nothing nearly asimportant as what's going on
with the Federal Reserveand fiscal policy.
- Well, people at homewanna know if these tariffs
are going to help or hurt American jobs.
Can you talk about that?
- I think from the perspectiveof manufacturing jobs,
it probably helps, I think,
from the overall prospectiveof does it cost me more
to buy things that areimported from other countries.
Yes, it will.
At the margin, does that meana little bit more inflation,
a little higher interest rates, yes.
That's kinda something that'snot that tangible to people.
I think if you work in an industry
where you're absolutelybeing disadvantaged
because of unfair trade practices,
I think you probably feel like
what's being done rightnow is the right thing.
- Yeah, so, he talked aboutevening the playing field
as far as when it comes to trade,
so, in essence, this is himkeeping a campaign promise?
- Yeah, and I think theeasiest way to understand
how fair or unfair thecurrent trade system is
is all countries except for the US
wanted to stay the same,
so that should give you some indication
that actually, it is true that the US
has generally been more lenientwith its trading partners
in order to help those peoplebecome more thriving economies
and, ultimately, that helps the US.
At this point, these economies
don't really need our assistance,
and so leveling the playing field,
which is what the President would say,
is the right approach.
I think all that endsup happening in practice
is it gets a little lessuneven toward the US,
which, as dynamic as the US economy is,
is probably all that we need.
- Okay, alright, Andrew, thank you so much
for your time today.- Thank you.