Chris Kuehl, Managing Director of Armada Corporate Intelligence, and regional expert in the field of national and international economics gave his professional opinion on what the country could expect in the next four years under President Elect Donald Trump’s term.
“What he’s doing is very Reaganesque,” Kuehl said. “He’s recruiting experts in their fields (for Cabinet positions) and saying, ‘if you do a bad job, I’ll fire you. He has some pretty interesting combinations, many with Wall Street and business backgrounds.”
He reminded the audience of nearly 200 at the Chamber’s 2016 Chairman’s Breakfast that presidents have a limited impact on the economy. Fiscal policy is set by the Federal Reserve Bank. Kuehl said that when President Barack Obama nominated Nobel Laureate Peter Diamond to serve on the Federal Reserve’s Board of Governors that it wasn’t successful because Washington, D.C. ultimately isn’t in charge of the Fed by design, see more on this here from the recent Economic Development Summit where KC Fed President Esther George spoke.
He said one of the reasons Diamond never served, despite the nomination, was because he was the wrong kind of economist.
“It’s like needing a pitcher and hiring a quarterback,” he said. “They are both professionals and throw a ball, but they aren’t exactly the same thing.”
He discussed how the current low unemployment rate is seen as a good thing by the media, but most economists know that isn’t necessarily the case. He said that the number of “discouraged” workers (those who have given up on finding a job and are no longer looking, or the U6 category) is high. When the U6 number goes down and they re-enter the often quoted U3 unemployment category (which is currently low) that will mean there is more confidence in the economy.
There are 900,000 job openings in manufacturing, 800,000 in transportation and 700,000 in construction and the average industrial welder is 67 years old. There simply aren’t enough people to fill those jobs, so those in the field are playing musical chairs, jumping to different jobs for slightly higher pay, which causes wage inflation.
“I get tired of hearing politicians say we need to create jobs,” he said. “We don’t need to create jobs. We need to fill the ones we have.”
Kuehl said making real change takes more than four or eight years.
“It’s a long slog to change the economy and it isn’t done through politics,” he said. “Business runs the economy, consumers run the economy.”
But there are a few things that can be expected, like higher interest rates. They have been remarkably low for a long time and it’s time for them to go up. He said the biggest impact of higher interest rates is that the dollar will be strengthened internationally, which will help export business like the agriculture economy. Kuehl said that the U.S. has a 14 percent GDP, which is nearly the same as Japan’s 14.7 percent GDP. So while we tend to think of ourselves as importers, we also are a dominant exporter. He said that every state in the U.S. compares to another country.
“Texas has the same GDP as Canada, Missouri’s compares to Morocco,” he said. “We’re massive. We’re the big dogs and we’re also the consumers.”
He said the U.S. has a love/hate relationship with China, but at the end of the day, the U.S. holds a lot of the cards.
“If we stop buying the junk you make, who else is going to buy it?” he theoretically said to China.
He said three things our country can expect is an infrastructure plan that could include more toll roads and bridges; a change in the tax structure to be more like other countries (set higher tax rates on items generally only the rich can afford); and a renewed interest in deregulation, especially in those that don’t do much, like the Bank Reform Act.
The Chairman’s Breakfast is presented by Farmers State Bank. At the event, the Community Alliance of Saint Joseph presented Dan Hausman, outgoing Eastern District Commissioner with a glass vase, thanking him for his service to Buchanan County.