Expect a great deal of uncertainty and keep your eyes on a lot of issues.
That was the message about the economy that Monmouth College professor Ken McMillan delivered Monday to members of the Monmouth Rotary Club.
In his fourth annual address to the civic group, McMillan told Rotarians that “uncertainty rides over everything when decisions are made about the economy, and the greater the uncertainty, the greater the risk.”
McMillan said that uncertainty is not necessarily a factor right now because the country is still early into the presidency of Donald Trump, although he acknowledged that is a factor.
“It’s a different kind of year, and I can’t go any farther without dealing with the elephant in the room,” said McMillan, the College’s Frederick H. Pattee Professor in Political Economy and Commerce and a Republican state senator from 1977-1983. “Donald Trump is governing in a rather unsettling way,” but his supporters have not yet pulled back from their commitment to what he is doing as president.
McMillan said gauging the economy’s direction for the year also involves anticipating how factors such as immigration, tax reform, Supreme Court appointments, labor relations, international trade and agriculture will affect jobs, spending and governments’ budgets.
Other issues to watch: the fate of the U.S. Affordable Care Act, fallout from Great Britain’s withdrawal from the European Union, and U.S. relations with Russia, China and Iran.
“We know that Russia and (Russian President Vladimir) Putin create complications,” said McMillan. “I was one of those people that said Russia is our greatest enemy, long before any presidential candidate in the last five or six or eight years ever said that.”
McMillan said that federal spending on infrastructure will have an impact on the local economy.
“I don’t have to tell you we need infrastructure, unless you have never driven in the right-hand lane going to Galesburg,” said McMillan. “Republicans and Democrats agree – we’ve got to do some things related to infrastructure. Because they agree we need to do something doesn’t mean they’re going to agree on what needs to be done.”
McMillan said it is likely that some infrastructure actions will be taken, such as building “roads, bridges and dams.” And, like other issues related to the economy, they will have a push-and-pull effect – adding to the GDP, adding to the national debt and increasing jobs, all while coming along “slowly.”
Not only are there uncertainties about many issues, but there is also uncertainty about how the “push-and-pull” dynamic will come into play for each.
“I don’t know what’s going to happen to milk prices and T-bills and inflation and unemployment,” McMillan said. “Uncertainty is the thing that hovers over everything ahead. But at least if you’re trying to guess, and if you’re trying to make your own investment or business decisions, just keep watching many of those things that I mentioned, because they are going to have some impact. And some of them are going to have positive impact on jobs and negative an impact on debt at the same time. It’s like sucking and blowing on a straw at the same time – you’ve got to figure out which one is most useful.”