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Nobel laureates warn Trump's economic policies could lead to deep recession

Xinhua, January 7, 2017 Adjust font size:

Several Nobel Prize-winning economists said Friday that U.S. President-elect Donald Trump's economic policies could lead to a deep recession of the U.S. economy, media reported.

Trump's plans for big tax cuts and spending increases pose risks. "It could lead to an explosion of public debt and ultimately cause a serious loss of confidence and a deep recession," Columbia University professor Edmund Phelps was quoted by Bloomberg as saying.

At the annual American Economic Association meeting held in Chicago, Phelps also criticized Trump's singling out of individual companies for abuse and praise, saying such interference could prevent newcomers from entering markets and bringing with them much-needed innovation, the report said.

While other presidents have run big budget deficits in the past, they depended on foreign purchases of U.S. debt to do so. Now, with Trump threatening to renegotiate U.S. trade agreements and shift to an "America First" policy, the willingness of foreigners to keep buying U.S. government securities can't be taken for granted, said Roger Myerson from the University of Chicago.

"There is a broad consensus that the kind of policies that our president-elect has proposed are among the policies that will not work," Columbia University professor Joseph Stiglitz said.

The U.S. interaction with other countries "has to be based on confidence and trust," Stiglitz said. "That's being eroded."

Trump plans to cut taxes on corporations and individuals and invest in infrastructure to boost the U.S. economy after he takes office on Jan. 20. Detailed related policies are unknown.

According to the Committee for a Responsible Federal Budget, a non-partisan think tank, on the day Trump takes office, debt held by the public will be at a post-World War II era record high of 77 percent of gross domestic product, and it is projected to almost double by 2050.

The deficit, which stands at nearly 600 billion U.S. dollars, will grow to 800 billion dollars in the final fiscal year of Trump's first term and exceed 1 trillion dollars by the end of a hypothetical second term, the committee said. Endi