Inflation and GDP growth forecasts are similar no matter who you are
The fiscal deficit is expected to deepen even if it is filled with Trump tariff revenues.
Both are expected to have high interest rates, so the Harris government’s interest rates will be lower.
Photo = REUTERS U.S. economists predicted that no matter which of Vice President <a href="http://www.world-today-news.com/donald-trump-whats-behind-the-us-presidents-baltimore-attack/" title="Donald Trump: What's behind the US President's Baltimore attack”>Kamala Harris or Donald Trump wins the election, inflation and growth prospects will be similar, but Vice President Harris will be more helpful to the U.S. economy in the overall economy.
According to a survey conducted last week by Bloomberg on 29 American economists on the 15th (local time), the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation indicator, is expected to average 2.2 per year over the next four years regardless of which of the two candidates is chosen. It was expected to rise by %.
Economists also predicted an average annual growth rate of 2% regardless of who wins.
US economists’ long-term forecasts for inflation and GDP growth are both slightly higher than the Federal Reserve’s long-term estimates. The Federal Reserve is targeting 2% PCE inflation and 1.8% GDP growth.
Expecting both inflation and economic growth to be high is one of the reasons why both candidates are expected to keep interest rates relatively high, but economists expected the Harris administration’s borrowing costs (base interest rate) to be lower than Trump’s.
What economists believe will be the biggest difference between the two candidates is the size of the fiscal deficit.
Economists estimated that if Trump becomes president, the budget deficit will average $2.25 trillion (KRW 3,060 trillion) over the next four years, while for Harris, it will be $2 trillion (KRW 2,700 trillion). The fiscal deficit, which measures how much federal spending exceeds federal revenues, currently stands at about $1.9 trillion (2,580 trillion won).
Because the candidates’ economic policies are so different, it is unusual to see similar predictions in some areas of the economy.
Still, 62% of economists surveyed said they expected Harris to advance a policy agenda that would do better in the long-term outlook for economic growth, employment and inflation. 38% said they expected Trump to do better.
The biggest concern about Trump’s economic agenda has to do with tariffs. Trump announced a basic 20% tariff on all imported goods and up to 60% on Chinese products. This increases the likelihood that other countries will impose tariffs on imports of U.S. goods, which is likely to lead to inflation and slow economic growth.
Harris and Trump have campaigned to prove to voters concerned about prices and interest rates that their policies will strengthen the economy. However, neither has explained in detail how they will finance such pledges, raising concerns that this will worsen their financial problems.
Harris is expected to reduce the budget deficit by raising taxes on wealthy individuals and corporations, but this effect could be offset by some spending on Medicare coverage for home health and the child tax credit.
Trump’s further corporate tax cuts and extension of tax breaks are expected to significantly reduce federal fiscal revenue. To make up for this, the plan is to rely on tariff revenue and increase energy production such as oil, but there are concerns that the fiscal deficit will widen further.
Guest reporter Kim Jeong-ah kja@hankyung.com
