2016-22 Trump's economic policy

This article discusses what policies the president - elect may pursue. Here are some quotations

"He wants tax cuts and increased spending on infrastructure. In other words more stimulus to the economy from the government budget."

"The aftermath of the financial crisis was an important part of the background to Mr Trump's election success. The subsequent recovery has not been particularly strong. Many Americans, especially in former industrial areas, have felt that it has passed them by.

Most of the work in terms of economic policy to support that recovery has been done by the US Federal Reserve, the country's central bank."[...]"The Fed has maintained a policy of ultra-low interest rates, keeping a key rate for lending between banks rates practically zero until a year ago. That tends to keep rates low across the economy. Even now that interest rate which the Fed targets has been raised only once since the crisis and is just a little above zero.[...]The Fed also ran a programme of "quantitative easing", buying financial assets with newly-created money. That may have helped add to the downward pressure on interest rates paid by businesses and households."

"But what about support from the government budget, or fiscal policy? Tax cuts and spending can be used to provide economic stimulus. It has often been done in the past in the US and many other countries. President Obama did do that in his first term, with the American Recovery and Reinvestment Act in 2009, a programme worth $800 billion."

"[...]more recently, Fed officials are thought to have believed that more stimulus from fiscal policy (taxes and government spending) would have been useful."

"Mr Trump's plans so far suggest a stimulus to the US economy from the Federal government budget. That means the Federal Reserve is likely to feel less need to continue providing its own stimulus in the form of its exceptionally low interest rates."

"Apart from anything else, higher Fed rates would give the central bank more ammunition - more scope to cut rates later - when the US economy has another downturn, as it surely will sooner or later."

A summary

• The recovery form the Great Recession was weak. The main economic policy was the low interest rates maintained by the Federal Reserve.
• Trump's plans include tax cuts and spending on infrastructure. 
• That is a traditional fiscal policy to stimulate the economy. For example, in 2009 in the US there was a fiscal program with extra spending of $800 billion, or around 5% of GDP.
• The fiscal stimulus will reduce the need for low interest rates and will allow the FED to start raising interest rates, perhaps as early as the next policy meeting, 13-14 December.
• Higher interest rates now will allow the use of monetary policy in the future, when a new recession comes.