“It won’t necessarily be easy, but Erie has a good reputation and historical record for rising to the challenge.” Political Impact
On the local level, experts say the impact of elections will depend on the candidate, but winning candidates, regardless of political affiliation, often feel empowered and emboldened with a “mandate” to confront the many economic challenges the community faces. “To the extent that this ‘mandate’ allows them to implement positive and constructive change to foster greater economic prosperity for the region, it will be for the good of the community,” says Dr. Louie. Many employers shared that sense of “winning” when President Trump was elected in 2016. In fact, PNC’s fall Small Business Survey (October 2017) captured those sentiments with 36 percent of smallbusiness owners saying they expected the policies of the new administration and Congress, in general, to have a positive impact on their business over the next year. One in eight (13 percent) anticipated a negative impact (a small increase over 9
World View
According to Dr. Louie, the potential military conflict with North Korea and a possible trade conflict with China are indeed two of the more pressing concerns for 2018. “Failure to arrive at a resolution to the former crisis will jeopardize human lives, while failure to address the second issue may pose significant economic risk to both countries,” says Dr. Louie. “Neither of these issues will be easy to resolve, but refusing to make an effort towards resolution is not a viable option.” Also making the list of important issues to keep an eye on when it comes to the economy in 2018: • the potential trade conflicts with Canada, Mexico, the European Union, and other parts of the world; • the ongoing debates surrounding the issues of health care, immigration, tax reform and fiscal policy; • strategies for maintaining U.S. industrial and technological leadership
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percent in spring, while 40 percent were unsure and 11 percent anticipaed no effect. “Their responses in 2018 will depend on whether the new administration and Congress are able to pass one or more pieces of substantive economic legislation by the end of the year or in the early part of next year,” says Dr. Louie. “If this occurs and the legislation reflects wellconceived attempts to improve economic performance, it will increase the number of positive responses next year. If, on the other hand, gridlock and stalemate persist into the new year, this is likely to produce more pessimistic or negative attitudes regarding the effect of public policies on the respondents’ businesses.” Although the Trump administration is close to completing its first year, Dr. Louie believes it is still too early to gauge its longrun impact on U.S. economic performance. “This is mainly because the administration has thus far been unable to enact any of its major economic policies, including its signature objectives of repealing and replacing the Affordable Care Act, implementing a massive infrastructure program and overhauling the tax system,” says Dr. Louie. “While some of the administration’s initiatives are now being put forth, such as a tax reform plan and a strategy for the renegotiation of NAFTA, the final results remain unclear. And even if the administration’s policies are enacted, it may take some time for them to have a real impact on the economy.” Dr. Louie points out that, although there have been some tangible and positive economic outcomes since the president took office, including an improved labor market, a robust rate of overall economic growth and a buoyant stock market, it’s difficult to determine how much of this is attributable to the still relatively young administration and how much is attributable to other factors, such as monetary policy or people’s changing expectations of what might eventually happen in terms of actual economic policy. According to Dr. Louie, some interesting indicators that can be used to gauge the administration’s economic impact or influence over the next few years are directly related to the administration’s own goals, namely the efficiency, equity and quality of the nation’s infrastructure, health
care, tax system and immigration policy. However, he says, these indicators are difficult to measure and inevitably involve normative value judgments. Instead, Dr. Louie indicates more easily quantified indicators should be considered, such as a sustained high rate of economic growth, a sustained high rate of job creation accompanied by a low rate of unemployment, a sustained moderate rate of inflation, a manageable annual budget deficit and national debt, a sustainable balance of trade, and a reasonable allocation of resources to education, training, and research that will help to maintain the nation’s leadership in technology and innovation. “These quantifiable indicators are among the most important measures to watch, especially for small and mid-size employers, since the economic impacts reflected by these indicators have the greatest potential to benefit these categories of employers,” says Dr. Louie. If PNC’s fall Small Business Survey is any indication, the outlook among business owners about the U.S. economy remains upbeat. In addition, the outlook for their own businesses was optimistic, with more than half anticipating increases in sales (54 percent) and profits (51 percent) during the next six months, an increase over fall 2016. The share of respondents who described their outlook for the U.S. economy as strongly optimistic was 29 percent, balanced by those with a moderately optimistic outlook rising to 58 percent. Just 12 percent of business owners and leaders expressed pessimism. According to Dr. Louie, ERIE generally agrees with such assessments regarding the U.S. national economy. “These optimistic assessments are consistent with other indicators of U.S. economic performance that reflect market psychology, such as positive consumer sentiment, robust consumer expenditures and the continuing bullish stock market,” he says. “As noted earlier, I think a big reason for this optimism, especially among owners of small and medium-sized businesses, is the expectation that the current administration will enact fiscal and regulatory policies that are not just favorable to the business owners themselves but which are also conducive to economic growth for the economy as a whole… . Optimism about the performance of the national economy is likely to spill over into optimism for the local economy.” To view ERIE’s most current ELI report, visit http://eriedata.bd.psu.edu.