Manko, Gold, Katcher & Fox - Environmental & Energy Law Practice

1. THE ECONOMY UNDER
TRUMP: WHAT TO EXPECT
RICHARD P. VOITH, PH.D
PRESIDENT AND PRINCIPAL
ECONSULT SOLUTIONS INC
February 7, 2017

2. Uncertainty at Record Highs

3. Investors Remain Optimistic:
S&P 500

4. PRESENTATION OVERVIEW
1. Where We Are
2. Trump Policies
3. Macroeconomic Impacts
4. Impacts by Sector
5. Conclusion

5. Where We Are: Conventional
Facts vs. Alternative Facts
1. Global Population and Global Income
2. Employment Trends
3. Unemployment Rate
4. Inflation
5. Federal Deficit
6. Federal Debt Payments
7. State of Cities
8. Labor and Capital
9. Immigration
10.Relative Global Wages

6. Global Population & Global Income
China 19%
India 18%
United
States 4%
Indonesia 4%
Brazil 3%
Russian Federation
2%
Mexico 2%
Other Countries 53%
US 24%
China 15%
India 3%
Russia 2%
Mexico 2%
Brazil 2%Indonesia 1%
Other Countries
51%

7. Employment Trends
Bill Clinton Barack ObamaGeorge W. Bush
69%
Of Trump Supporters believe
the job situation has gotten worse

8. Unemployment Rate
George W. Bush Barack Obama
“I’ve seen numbers of 24% -- I actually saw a
number of 42% unemployment. Forty-two
percent” - Donald Trump, September 28,2015

9. Inflation

11. Federal Debt Payments

12. State of Cities: Philadelphia
Population

13. State of Cities: Philadelphia
Investment

14. State of Cities: Philadelphia
Murders
0
100
200
300
400
500
600
Homicides

15. Labor and Capital

16. Immigration: Net Migration

17. Immigration: Mexico

18. Global Relative Wages Adjusted for
PPP
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000

19. Forecasts of the Trump Economy
Mark Zandi
Moody’s Analytics
Tax Policy Center OECD
Annual US GDP Growth Rate Forecasts:
0.6% 2.3% 2.3%-3%

20. Trump’s Policies
Immigration
National Security
Tariffs vs. Weak Dollar
Deregulation
Infrastructure
Investment
Federal Reserve
Repeal Affordable
Care Act
Jawboning
Domestic International

21. – Key Features
• Travel Ban 7 Majority Muslim Countries
– Reduced Legal and Illegal Immigration
• Border Wall with Mexico
– Shorten H1B Visa Periods
Immigration

22. – Social Security and Demographics
– National Competitiveness
– Regulatory / Enforcement Costs
o Will Policies Improve Security?
o Will Policies Improve the Competitiveness
of US Workers?
Macro Impacts: Immigration

23. – Key Features
• Increased Military Expenditures
• America First Policy
National Security

24. – Increased Economic Activity Near Term
– Rising Federal Debt or
• Reduced Expenditures in Other Areas
– Greater Uncertainty for Global Business
Macro Impacts: National Security

25. – Key Features
• “Border Adjustments”
• Weak Dollar Policy
• Renegotiating or Opting Out of Treaties
Tariffs & Dollar

26. Macro Impacts: Tariffs and Dollar
– Higher Costs
– Inflation
– Reduced Imports
– Higher Interest Rates
– Risks
• Retaliation
• Global Downturn
• Where Will Global Companies Invest?

27. – Key Features
• Reduced Environmental Regulation
• Reduced Financial Regulation
– Increased Travel / Immigration Regulation
Deregulation

28. – Lower Costs for Businesses Near Term
– Lower Costs for Infrastructure
– Changing Health Costs
– Increased Risks Associated with Bad
Financial Behavior
o Is Climate Change a Hoax?
o Great Recession in Part Caused by Poorly
Regulated Shadow Banking
Macro Impacts: Deregulation

29. – Key Features
• Simplification in Theory
• Increased Complexity with Increased Use
of Tax Credits
• Lower Marginal rates for High Income
• Reduce or Eliminate Corporate Income
Tax
• Eliminate Carried Interest
• Reduced Total Taxes
Tax Reform

30. – Corporate Income Tax Reduction/Reform
will Improve Competitiveness
– Lower Marginal Rates on High Income
• Higher Deficits
• Higher Interest Rates
• Greater Interest Paid on Debt
– Recession Risk in 3 years
Macro Impacts: Tax Reform

31. – Key Features
• Trillion Dollar Infrastructure Investment
• Tax Credits a Key Funding Sources
Infrastructure

32. – Increased Economic Activity
– Potentially Higher Inflation/ Interest Rates
Improved Productivity
o Will Infrastructure Have Public Benefits if
o Guided Heavily by Private Profit?
Macro Impacts: Infrastructure

33. – Uncertainty About President Trump’s
Intentions with Respect to the FED
– Loss of Independence Would Be a Disaster
Federal Reserve

34. – President Trump Views Himself as a Master
Negotiator
– Most Believe that the Economy Is Too
Complex to Effectively Deal on a One-off
Basis
Jawboning

35. – Healthcare Is a Major Cost Element for
Employers
– Healthcare Is a Major Player in Most State’s
Economies
Repeal ACA

37. 1. Education and Healthcare
2. Manufacturing
3. Finance
4. Construction and Real Estate
5. Retail
6. Energy
7. Regions, Cities and Communities
Impacts By Sector/Area

38. – Uncertainty -> Inhibits Hiring and Growth
– Immigration
• Negative for High Skilled Labor
• Many Rural Doctors are Immigrants
• Lost of Full Freight Students
Eds and Meds

39. – Tariffs
• May Benefit if No Retaliation
• Incentives to Move Plants Overseas if Retaliation
• Disrupt Global Supply Chains
– Infrastructure
• Enhances Productivity
– Higher Interest Rates Adversely Affect Cyclical Industries
– Mixed Bag for Auto Manufacturing
Manufacturing

40. • Deregulation
– Boon to Finance, Short Term
• Immigration—
– Talent Constraint
– Services Can Be Produced Elsewhere
Finance

41. – Infrastructure Spending Improves
Construction if Major Program Approved
– Real Estate at Risk From Higher Interest
Rates
Construction and Real Estate

42. – Immigration
• Disrupts Supply Chains
• Lowers Labor Supply
– Continued Challenge from Online
Retail

43. – Deregulation
• Boon to Fossil Fuel Suppliers, Pipelines
• Negative for Some Rail Shippers
• Negative for Renewable Energy
– Fossil fuel prices under continued pressure
Energy

44. – Immigration
• Immigrants have been lifeblood of cities,
some rural communities
– Tariffs
• Adversely affect ports and border
communities
– Energy
• Communities differentially affected by
Climate Change
– Regulation: little impact in states that impose
regulations anyway
Communities

45. – Huge Uncertainty
– Trade War or Capitulation?
– War or Capitulation?
– Is Trump Crazy or Crazy Like a Fox?
Conclusion