Economist raises concerns about Trump

Dr. Michael Knetter, president and CEO of the University of Wisconsin Foundation speaks at the Economic Trends breakfast.

Last updated on July 18th, 2019 at 01:27 pm

While the U.S. economy enters 2017 with “great momentum” and rising consumer confidence, economist Michael Knetter expressed concern about the impact that President Donald Trump’s administration will have.

“Donald Trump has a life history that is unlike that of most presidents,” said Knetter, who worked as a senior staff economist for the George H.W. Bush and Bill Clinton presidential administrations. “I think we all need to be hopeful, supportive, but also concerned and on the watch.”

Trump’s unpredictable personality and approach to the presidency is a concern, Knetter said. Click here to see a Q&A with Knetter in the current issue of the BizTimes Milwaukee magazine.

“I am very worried,” he said. “The presidency is a marathon, not a sprint. I don’t know that I see in the current president a person that can learn empathy and other leadership qualities in his life that give me confidence he is going to be able to work with all of the people that the president of the United States needs to work with to be successful…I am just not sold that Donald Trump is equipped to be the leader of the most important country in the world.”

Knetter made his remarks about Trump during his annual macroeconomic outlook at the Northern Trust Economic Trends breakfast, presented by BizTimes Media, which was held Thursday at the Italian Community Center in Milwaukee. About 500 people attended the event. Click here to see a video recap of the event.

Knetter, who is currently the president and CEO of the University of Wisconsin Foundation, predicts that the U.S. economy will continue to grow in 2017. He predicts that GDP will grow 2.25 percent and that the S&P 500 will rise by 5 percent during the year.

“I do think the economy is gaining a little bit of momentum,” Knetter said.

But uncertainty with how Trump will govern makes it harder to forecast the economy this year, he said.

“There is a huge amount of uncertainty, simply because it is very hard to handicap this presidency,” Knetter said.

The good news is that businesses should benefit from Trump’s plans to dramatically reduce regulations, compared to President Barack Obama’s approach of extensive regulations.

“That’s going to be good for business,” Knetter said. “It’s almost like we were walking around in a big fog and Donald Trump got elected and all of a sudden the fog was turned off and people said, ‘Oh, it’s a sunny day.’ There is some truth to that. It’s undeniable.”

Trump’s plans for major infrastructure spending could help boost blue collar employment, Knetter said. But the new president’s get tough approach to trade policy could backfire, he said. Placing tariffs on imports to try to bring more manufacturing jobs back to the United States will drive up prices for goods.

“That is not going to be a panacea to bring back blue collar labor,” Knetter said. “The share of jobs producing stuff in this country has been in decline for a long time. That will continue regardless of the trade (policy).”

American businesses should be concerned that Trump has been pressuring companies to keep production in the United States and threatening them with tariffs if they try to import goods they make in other countries, Knetter said.

“If you’re a capitalist you should be worried that our president is singling out individual companies and saying, ‘You can’t move your plant to Mexico.’ That’s what we do in a dictatorship,” Knetter said. “When I read that Trump loves (Russian president Vladimir) Putin, I don’t think he actually loves Putin, I think he loves Putin’s game. I don’t think our president should be picking who gets to move production abroad and who doesn’t.”

W. Kent Lorenz, chairman and CEO of Pewaukee-based Acieta, who was also a speaker at the Economic Trends event, said he is also concerned about Trump’s unpredictability and fears rash action by the president could help trigger a cataclysmic “black swan” event, that would disrupt the economy.

“Our geopolitical situation in the world has never been more unstable,” Lorenz said. “I am extremely concerned that we could trigger a black swan event. There is a lot of instability and uncertainty (in the world) and we have a president that is, I’ll just say too early to tell how he is going to react. But I sure as heck don’t like him tweeting at three in the morning.”

Trump and the Republicans have also promised to repeal and replace the Affordable Care Act, known colloquially as Obamacare. But Cynthia LaConte, CEO of Milwaukee-based Dohmen, who also spoke at the Economic Trends event, said that will be difficult to do.

“Repeal is easy. Replace not so much,” she said. “The devil is in the details.”

The Affordable Care Act has improved access to health care, resulted in improved outcomes and slowed the pace of the increase in health care costs in the United States, LaConte said.

“(The Affordable Care Act) is not perfect, but I’m a big believer in it’s better to act incrementally,” she said.

The health care industry in the United States is larger than the GDP of all but four other nations and health care in the U.S. has problems with high cost, lower quality, poor access and poor outcomes, LaConte said. These are enormous problems and business innovation could go a long way in solving them, she said.

“The application of technology is the only thing that will bend the health care curve,” LaConte said.

About a third of the cost of health care in the U.S. is paid for by taxpayers, and if those costs are not brought under control health care spending will engulf the federal government, LaConte said.

“Unless we want America to turn into a big (health) insurance company with an army, we have a lot of work to do on health care,” she said.

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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