Groundhog…Baseball…USA Economics…See the Connection?02.06.2019
Groundhog…Baseball…USA Economics…See the Connection?
Punxsutawney Phil did not see his shadow this February predicting an early spring this year. Issue is the groundhog is only 40% correct! While that batting average may be good enough for the Hall of Fame in the MLB, it’s a failing grade for prognostication. While I would find great enjoyment in chatting about sports and furry animals, let’s take a look at some highly credentialed economists and see what they are predicting for 2019 and beyond for the greatest country in the world the United States of America.
I had the pleasure of sitting in on an Economic Summit in Hillsdale, Michigan a few weeks back featuring three highly regarded economic professors from Hillsdale College with the keynote speaker and Economic “Jedi Master” - Arthur Laffer Phd. Dr. Laffer is frequently seen on Fox, CNN, CNBC and is commonly referred to as the “Father of Supply-side Economics.” Dr. Laffer was an Economic Advisor to President Ronald Reagan, President George H. Bush and even Prime Minister Margaret Thatcher. Laffer also co-authored the book with Stephen Moore, President Trump’s economic advisor “Trumponomics: Inside the America First Plan to Revive Our Economy”. During his talk, Dr. Laffer spoke of the five pillars of economic success for any country:
I. Low-rate, board-base, flat tax – avoid loopholes and complex reporting; everyone pays their fair share and the rate is low enough that everyone complies.
II. Spending Restraint – Laffer points out that government spending is technically a tax, as government is not a revenue producing enterprise. Our government is still spending too much. The good news is the interest on their spend is still low enough to not present issues, plus Dr. Laffer points out, “…you cannot save your way out of the budget deficit, you need to grow your way out….with strong GDP growth.”
III. Sound Monetary Policy – essentially have an interest rate that’s not too high and not too low. Where we are today is optimal; as economy is growing at spectacular levels, but still very low interest rates are not driving us towards inflation.
IV. Regulatory Policy – make it easy to do business in the USA. Energy deregulation, unnecessary compliance laws and mid-range corporate tax rate has allowed the USA to welcome back many businesses that left for cheaper overseas business environments.
V. Free Trade – while tariffs and pulling out of imbalanced trade deals have had an impact to the USA, the end game is Free and Equal trade with all countries. The USA’s imbalance is unbelievable, but President Trump is ultimately seeking a level playing field for US goods and services in foreign countries. We will get there as President Trump is an outstanding business person and a strong negotiator.
“It’s the best first term of any administration I’ve ever seen,” Laffer stated to the applauding crowd at Hillsdale College….me included! He continued to say “…the best is yet to come….”
Before Dr. Laffer took center stage, we heard from three highly regarded economic professors from Hillsdale. Each had their interesting perspective supported by fact, opinion and emotion! It made for a meaty and entertaining show. A few interesting statements from the “U.S. Economic Forecast 2019 Panel” included:
“…the past recession took 76 months to reclaim full job loss.”
“…banks still sitting on approximately $1.6 trillion in reserves so lending will continue to be robust.”
“…household debt is at $15.9 trillion, yet household assets are at an all-time high.”
“…Fed forecasting GDP to grow around 2.3%, all signs pointing to economic growth.”
“…reduced regulation has unleased entrepreneurs to start, invest and grow their businesses.”
“…student debt now running around $1.6 trillion, these are the future consumers, entrepreneurs and tax payers.”
“…child births are down to 1.4 children per family. This change is driven by higher student debt and higher home prices and down payments have parents starting later.”
So here is some perspective from a serial entrepreneur. I am encouraged and excited about the economic trend in the USA. All of Dr. Laffer’s pillars are being addressed or are slated to be discussed by the current administration. GDP growth is forecasted by the experts and that is consistent with what WE see each day in our preservation, inspections and in our fastener distribution businesses. Interest rates are still low and our banking partners (clients and investors) are all posting strong earnings. While the residential foreclosure figures continue to trend lower, there is plenty of work and opportunities in the marketplace if you just follow the homes. Laudan continues to invest in broadening our capabilities by adding new clients, expanding our territory foot-print and driving process efficiency be re-engineering work-flows.
While Punxsutawney Phil is 40% accurate on his predictions, I feel much more confident in the positive economic momentum witnessed over past two years. Armed with the knowledge, experience and past successes of Dr. Laffer and the economic indicators assembled by some very impressive analysts in Washington who monitor everything economics, our companies see incredible opportunity and much sunshine on the horizon!
Sources: The Hillsdale Collegian, Hillsdale College Professors’ Dr. David Basterfield, Dr. Gary Wolfram, Dr. Ivan Pongracic Jr.
Author: Laudan Properties Founder, Kevin Weidinger