by Calculated Risk on 11/11/2024 11:53:00 AM

After the election in November 2016, I pointed out that the economy was solid, that there were significant economic tailwinds and that it was unlikely that Mr. Trump would do everything he said during the campaign (emphasis added). See: The Future is still Bright! and The Cupboard is Full. I was pretty optimistic on the economic outlook!

By early 2019, I was becoming more concerned: "So far Mr. Trump has had a limited negative impact on the economy. ... Fortunately the cupboard was full when Trump took office, and luckily there hasn't been a significant crisis".  Unfortunately, the COVID crisis struck in early 2020 and Trump performed poorly.

Once again, the economy is in good shape (last week Fed Chair Powell called the economy "remarkable"), and it is unlikely Mr. Trump will do most of what he said during the campaign.  For example, he promised no taxes on tips or overtime, the return of $2 gasoline, repealing and replacing the ACA, and deporting 20+ million people.  All of that is unlikely.  There are many other proposals, such as revamping the Federal workforce and dramatically cutting the Federal budget, that are unclear.

Trump will likely renew the tax cuts for the wealthy, increase tariffs - especially on imports from China - limit legal immigration (Trump said the "Country is full"), and increase deportations (but not anywhere close to the 20 million he said during the campaign).  Note: I don't expect any tariffs on Canada and Mexico.

However, the economic tailwinds are more limited in 2024 than in 2016, so the margin for error is smaller.

For example, in 2016, I was positive on housing starts and new home sales.  

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

The black arrow points to the election in 2016, and I was projecting further increases in housing starts.

It now seems likely that housing starts will move more sideways.

Also, in 2016, demographics were improving, and the largest cohort in US history was moving into their peak earning years.  Now, demographics are more neutral, and possibly even negative if legal immigration is limited.

Also, I don't expect any progress over the next four years on key long-term economic issues like climate change and income / wealth inequality (that will likely get worse).

Since Trump's policies will not be evidence based (he rejects data that doesn't fit his views), I expect generally bad results. However - as in his previous term - bad policies might mean higher deficits with little return - not an economic downturn. Until we see the actual policy proposals, it is hard to predict the impact. I will write more as policies are enacted.  However, I'm not sanguine.