What’s in America’s Fiscal Future?
At a Predictions event in New York City, New York Federal Reserve CEO William C. Dudley displayed cautious optimism about economic growth.
by Maria Minsker '13
The election dominated much of Professor Maureen O’Hara’s fireside chat with President and CEO of the Federal Reserve Bank of New York William C. Dudley at the Cornell SC Johnson College of Business Annual New York City Predictions event. Co-hosted by the Johnson Club of New York City and held at the Marriott East Side, Feb. 16, the event attracted more than 325 Cornell alumni and guests.
Despite the uncertainty surrounding a number of President Donald Trump’s policy decisions, the Dow Jones industrial average recently reached 20,000 and markets in general have performed well. Although Dudley joked that he doesn’t foresee the Dow reaching 30,000 any time soon, he did say that upward economic trends would continue.
“It’ll be more of the same over the next few years. The economy will grow above trend, generating job growth. We’ll also likely see inflation grow to reach the two percent objective [set by the Federal Reserve],” Dudley said. When asked why there’s been such uncharacteristically high confidence in the market given the political climate, Dudley presented two reasons.
First, it’s possible that with Republicans controlling both the House of Representatives and the Senate, political deadlock in Washington will ease. Second, though the details are still unknown, the current administration has made it clear that a fiscal stimulus may be on its way. “We don’t know when it’s coming, how it’s coming, or how much it’ll be, but the consensus is that there will be some fiscal policy that comes down to support the economy,” Dudley said.
Globalization was a key point of contention during the election, and many pundits have argued that it was Trump’s stance on this issue that won him the election. Dudley weighed in on the topic, expressing his view that some aspects of globalization have indeed hurt the American middle class.
“Globalization has lifted hundreds of millions of people out of poverty, so from that perspective, it has been a good thing. At the same time, people have also been left behind by globalization, and the United States forgot about those people,” he said. “If you look at income distribution, it’s very skewed. Income mobility is not very good. We need to consider these things as a country so that globalization doesn’t lift some, but lifts all,” he added.
Dudley and O’Hara also briefly discussed technology, and how technological breakthroughs would influence the economy over the next few years. The idea of automation replacing human labor is not new, Dudley pointed out, though O’Hara countered that while technology only used to replace lower-skilled jobs, it is now “marching up” the corporate ladder. Still, the bigger area of concern, according to Dudley, is education.
“We always talk about how technology puts people out of work and that hasn’t happened on a significant scale yet, so I’m skeptical that we’re at a critical turning point now,” Dudley said. “We do, however, need to do a better job of retraining people and giving them a better system for retooling themselves if they find themselves out of a job.”
Technology as well as other resources that make employees more productive have raised employers’ demands, meaning universities have to work harder to prepare students for the real world, Dudley said, in wrapping up the discussion. “We need to be better at matching the skills that people get at universities to actual business needs,” he said. The New York Federal Reserve, for example, has been trying to build better partnerships between business and education in order to ensure that what students learn at universities empowers them at their jobs.