But how much influence does the person sitting in the White House, at 10 Downing Street, or on the ninth floor of the Beehive have when it comes to changing the economic tide?
Stocks on Wall Street closed on record highs the day after Trump’s victory, largely due to confidence in how his policies will benefit them.
New Zealand Herald business editor-at-large Liam Dann told The Front Page we’ve seen similar economic cycles emulated across the western world – so it’s understandable when people question why individual politicians are blamed.
“In the end, fixing the economy means getting the settings right,” Dann said.
“Any Government can pump money into the economy. Central banks can pump money into the economy. But, as we’ve seen, if you just pump money in without it being underpinned by real wealth creation and, basically, productivity, then you’re just creating inflation.”
When it comes to the US, Trump has promised widespread tax cuts, something Dann said leaves economists to question whether the country can afford it.
“Because they already have a giant deficit in their government spending,” he said.
“They don’t take enough revenue for all the government spending, so they have to borrow and the US Government has borrowed trillions. That means they have to be sensitive to what happens to interest rates and their ability to borrow further.
“Some people have suggested that if Trump was to do all the tax cuts he’s promised, it really would blow out the national debt quite badly and push interest rates up very high.”
Trump has suggested his heightened tariffs will pay for the tax cuts – something economists doubt.
“It may come down to how big the tariffs are and how big the tax cuts are in the end. But, if he did the most extreme stuff – it doesn’t add up in an orthodox economic way. It becomes a very big experiment because Amerca’s never done this before,” Dann said.
“It might work to some extent. He might get a bump in manufacturing and grow the economies in these Rust Belt areas.”
Listen to the full episode to hear more about how Trump’s second term could shape the US economy – and whether governments can really take credit for “fixing” an economy.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
