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Trump's Trade Policies Could Work Against Fiscal Stimulus
The U.S. government has set the stage for an economic experiment with its large, late-cycle fiscal stimulus, but the Trump administration's trade agenda threatens to undermine the process as soon as it begins. Tax cuts and spending increases are projected to fuel an ill-advised federal budget deficit for 2019 in excess of $1 trillion. With the economy operating near full employment, the extra impetus from deficit spending could cause inflation to overheat. The Federal Reserve would respond with a rapid increase in interest rates that triggers a recession. The fiscal stimulus thus shortens the expansion. There are ... (full story)
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