Source: Wall Street See

How can Trump promote the continuous prosperity of the US economy after returning to the White House?

On November 5th, Mohamed El-Erian, the President of Queen's College, Cambridge University, and advisor to Allianz and PIMCO, elaborated on 5 recommendations that the new US president needs to follow after taking office, including repositioning the economy while maintaining economic growth, addressing high budget deficits and rising debt, avoiding excessive use of favorite economic tools, restoring US leadership in the global economic and financial order, and adopting appropriate communication methods.

El-Erian stated that Trump said he wanted to create jobs, end inflation, protect domestic businesses, improve housing affordability, etc., but he lacks specific policy details to fulfill these promises. Only by following the above recommendations can there be a greater chance of fulfilling these promises.

1. Reposition the economy while maintaining economic growth

El-Erian stated that first, Trump must find a way to reposition the economy and maintain economic growth while fully utilizing future prosperity drivers.

This requires eliminating obstacles to the development of existing economic engines in the US such as manufacturing and services, and promoting future economic growth by supporting innovation diffusion in areas such as ai, life sciences, green energy, defense, medical care, and food security.

El-Erian believes that Trump should assess the Inflation Reduction Act and the Chip Act and make necessary adjustments to achieve his goal of structurally reshaping the US economy. In addition, a more dynamic regulatory approach is needed to promote innovation.

2. Addressing the issues of high budget deficits and rising debt.

El-Erian stated that the second issue facing the US economy is high budget deficits and rapidly rising debt, which Trump needs to address.

Currently, the United States government's deficit rate exceeds 6% of GDP, and government debt accounts for 120% of GDP, putting the US economy on an unsustainable path.

El-Erian mentioned that the current US fiscal system lacks sufficient resilience and flexibility, and the new government needs to help make the public finance system more flexible. To achieve this, the new government needs to reform the tax system, eliminate distorting tax policies, rationalize expenditures, and release more resources for investment and precautionary reserves.

3. Avoiding the excessive use of preferred economic tools.

El-Erian stated that the new president needs to avoid the excessive use of preferred economic tools, which for Trump means avoiding excessive use of tariffs and tax reduction policies.

4. Restoring the US leadership position in the global economic and financial order.

El-Erian stated that the new government needs to restore the US's reliable leadership position in the global economic and financial order. Otherwise, the US will face more frequent and severe shocks.

Fifth, adopt appropriate communication methods.

El-Erian stated that the new president needs to use appropriate communication methods to carefully describe and address economic issues.

In 2021, the Biden administration's mistake, following the Fed, in describing inflation as 'transitory' is a good example - subsequently, inflation soared to over 9%.

In 2016, Trump's performance after winning was very good, as he used moderate expectations on economic issues, helping to turn stock market losses into gains and setting a favorable economic narrative for himself - which has continued to benefit him.

Editor / jayden