Most in survey see US fiscal policy as too aggressive

WASHINGTON – A majority of business economists now view the government’s tax and spending policy as moving too aggressively to stimulate economic growth, setting up a potential increase in the deficit in the coming years, a new survey shows.

That view emerged from the latest economic policy survey by the National Association for Business Economics, polling 211 members at companies and industry groups. The survey by NABE, a professional association for business economists, academics and others who use economics in the workplace, was released Monday.

The 52 per cent of economists who consider the government’s fiscal policy “too stimulative” compares with only 20 per cent in August, in the previous economic policy survey. This time, 37 per cent of respondents judged tax and spending policy as “about right,” down from 46 per cent in August.

By contrast, the economists are more supportive of the Federal Reserve’s interest rate policy: more than 6 in 10 have pegged it as “about right.” That’s the highest percentage in eight years, according to NABE.

“Overall, the (survey) panel expects the deficit to grow as a percentage of the economy in the longer term,” NABE Vice-President Kevin Swift, chief economist of the American Chemistry Council, said in a statement.

The NABE economists, reflecting the prevailing view of corporate America, continue to have a strong preference for more conservative fiscal policy in the long run.

The $1.5 trillion Republican tax-cutting legislation signed into law late last year, President Donald Trump’s signature accomplishment in the GOP-controlled Congress provides steep cuts for corporations and wealthy Americans while offering more modest reductions for most low- and middle-income families and individuals. Coupled with a $400 billion bipartisan budget agreement enacted this month, it has raised the possibility of greater inflation. That could make the Fed more likely to tighten credit.

Experts have said, and the new Trump budget proposal acknowledges for the first time, that the massive tax overhaul likely will add billions to the deficit and not “pay for itself” with economic growth and higher revenues. The Trump federal spending plan unveiled in mid-February contains trillion-dollar deficits.