“You can never guarantee anything about economic growth,” said economist David Berson, who recently spoke at the 33rd annual Economic Crystal Ball Seminar at the University of North Carolina-Asheville.
“Nobody can tell you what the stock market will do tomorrow,” Berson added.
Yet Berson, senior vice president and chief economist for Nationwide Insurance, and Dr. James Smith, chief economist for Parsec Financial Management, did offer predictions based on their experience—and a host of variables, including the current political climate of President Trump’s administration.
Berson projected modest economic growth in the next few years, which he said would come as a result of pro-growth policies fostered by the Trump administration. The downside to this prediction is that risks are involved, he noted.
“There are policy risks, geo-political risks,” Berson said.
“No one knows what the President will do next,” Smith stated.
And it is not possible to predict how Congress will act on Trump’s recommendations, he pointed out.
“There are a lot of things the President can’t do on his own; many of the things need Democratic support,” Berson said.
However, he expressed optimism in his economic forecast.
“We think the net effect will be strong growth over the next few years,” he said.
Berson also said he did not envision a recession happening anytime soon—at least not in the next few years. Smith agreed that another recession may loom in the future, perhaps in 2021.
While focusing on economic concerns, Smith pointed to slow gross domestic product (GDP) growth in recent years, which he said has averaged 2 percent annually. This slow rate of growth is probably the main reason that Donald Trump won the election, he stated.
“We used to average 3 percent,” Berson said. “If we grow only 2 percent over the next few years, we will be much poorer.”
That 1 percentage point makes a huge difference, he said.
In the long run, two primary things matter: labor force growth and productivity, Berson said. To encourage labor force growth, the country needs a good immigration policy, he said.
“We need more immigration. That will raise the labor force and will get an increase in productivity,” Smith added.
Regulatory relief for businesses also would help spur economic growth, Berson said. Over-regulation that burdens businesses is one of the factors that have kept growth down, he remarked.
Tax reform efforts, which include reducing the corporate income tax rate from 35 percent to 15 or 20 percent, also could prompt more business investment and higher economic growth this year and beyond, Smith observed.
The biggest problem facing the U.S. economy is the federal budget deficit, which is largely caused by Medicare, Smith said. Senior citizens pay about $100 a month for Medicare benefits. But the actual cost is closer to $900 a month, he noted.
“It’s not easy to resolve,” Smith said of the Medicare issue. “People over 65 vote,” he remarked.
Excessive spending by the federal government is also a huge problem, Smith said.
Citing a recent publication of the Budget and Economic Outlook of the Congressional Budget Office for fiscal year 2016, Smith pointed out that last September, the federal government had revenues of $3.267 trillion and outlays of $3.84 trillion. And the national debt was $14.2 trillion, 77 percent of GDP, he noted.
At the beginning of the program at Lipinsky Auditorium at UNC Asheville, Travis Boyer, senior financial advisor of the Asheville office of Parsec Financial Management, introduced Berson and Smith and gave an overview of their credentials and experience, which he said collectively span more than six decades.
Berson has served as vice president and chief economist at Fannie Mae, president of the National Association for Business Economics, and in a senior management position with Wharton Econometrics Forecasting.
In his more than 30 years as an economic forecaster, Smith has served in private industry, government and academic institutions, including tenures with Wharton Econometrics, Union Carbide, the Federal Reserve and the President’s Council of Economic Advisers.
The seminar was sponsored by the UNC Asheville Department of Economics and Parsec Financial Management.