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Why Most Economists Are So Worried About Trump

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The mood among economists in a meeting in Chicago was as dreary as one of the city’s winter days. Credit Peter Thompson for The New York Times

I feared that I might have been talking with an unrepresentative group until I stumbled upon a recent survey of leading academic economists showing a similar pattern. Of the 31 respondents to the University of Chicago’s IGM Economic Experts Panel, 28 disagreed with the claim that the “seven actions to protect American workers” in Mr. Trump’s 100-day plan would improve the economic prospects of middle-class Americans. The dissenters were two economists who were uncertain, and one who had no opinion.

The pervasive pessimism among professional economists stands in stark contrast with the judgment of financial markets, which rose strongly in the wake of Mr. Trump’s election, and have remained buoyant since.

It also puts economists at odds with the judgments of small-business owners. According to the latest survey from the National Federation of Independent Businesses, the balance of members who expect general business conditions to improve has moved drastically. In October, the pessimists who saw business conditions as likely to worsen outnumbered the optimists by seven percentage points; the latest survey from December shows that the optimists now outnumber the pessimists by 50 percentage points. It’s an extraordinary shift — one the association described as “stratospheric.”

I’m not quite sure how to reconcile these conflicting signals. One possibility is that Mr. Trump remains something of an unknown, and each group is filling in the blanks differently. Small businesses, pleased to see a businessman in the White House, might be tempted to believe the best. By contrast, there’s a reason that economics is called the dismal science, and few economists trust politicians — of either stripe — to get things right. Greater uncertainty gives economists a broader canvas upon which to project their pessimism.

But it may also be that these groups are describing different things. Businesses and markets care about profits. Economists focus on workers as well as the businesses they work for, on buyers as well as sellers, and on new firms as much as existing firms. Mr. Trump’s anti-regulatory zeal may help businesses but hurt workers; his anti-trade agenda could help sellers but hurt buyers; and his instincts to protect existing jobs may advantage existing businesses at the expense of the next generation of entrepreneurs.

Or perhaps the optimism of small-business owners is about what they think is most likely to happen, particularly in the short run. My conversations with economists revealed them to be more focused on the long run, particularly on the risk of really bad outcomes. By this view, the short-term optimism may be well placed, but should be juxtaposed with the possibility of a trade war, a catastrophic economic decision like defaulting on the national debt or a foreign policy disaster. Nearly every economist I spoke with said the risk of these left-tail events had risen.

Perhaps this fear makes sense: It’s the double whammy that worries economists, that Mr. Trump’s populist pose assigns less value to economic expertise, while also creating the conditions under which it’s most likely to be needed.

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