CAMBRIDGE – After years of hibernation, will the US economy rouse itself for a big comeback over the next couple of years? With an incoming Republican administration hell-bent on reflating an economy already near full employment, and with promised trade restrictions driving up the price of import-competing goods, and with central-bank independence likely to come under attack, higher inflation – likely exceeding 3% at times – is a near-certainty. And output growth could surprise as well, possibly reaching 4%, at least temporarily.
Impossible you say? Not at all.
The economy already seems to be growing at a 3% annual clip. And even steadfast opponents of President-elect Trump’s economic policies would have to admit they are staunchly pro-business (with the notable exception of trade).
Consider regulation. Under President Barack Obama, labor regulation expanded significantly, not to mention the dramatic increase in environmental legislation. And that is not even counting the huge shadow Obamacare casts on the health-care system, which alone accounts for 17% of the economy. I am certainly not saying that repealing Obama-era regulation will improve the average American’s wellbeing. Far from it. But businesses will be ecstatic, maybe enough to start really investing again. The boost to confidence is already palpable.