Brian Wesbury, chief economist of First Trust Advisors, says it is time to stop talking about a “new normal.”
In fact, he thinks the view of economist Mohamed El-Erian – namely that the economy hasn’t reached “escape velocity” – is “completely wrong,” Wesbury explained in his lunch speech Tuesday before 700 guests at the FPA NorCal Conference in San Francisco.
“Business investment is at an all-time high,” he stated, before discussing why he disagrees with the economic analysis of the presidential candidates.
To Wesbury, the rocket analogy doesn’t work, since rockets go up and into orbit or crash. “We have been at this [economic growth pace] for seven years, not three minutes. You could say we’ve reached low Earth orbit at 2% growth and not 4%,” he said.
“Nothing is majorly wrong with the economy,” he said. Why the slow growth? His view is that the answer is government spending, which now accounts for about 17% of GDP.
“Government is too big,” Wesbury stated, pointing to a federal budget of $3.7 trillion. Adjusted for population growth and price changes, the budget should be $2.8 trillion if spending had remained at 1990 levels, he said.
Donald Trump says China and Mexico are to blame, while Hillary Clinton and Bernie Sanders point to growing economic inequality and the weakening power of unions, he says.
The need to meaningfully push back against government’s growth and its negative impact on the economy is “why we have Donald Trump today, and why people don’t think [traditional] Republicans matter anymore,” Wesbury added.
“Our government is 30% larger per person vs. 1990. I believe that is why the economy is not growing as it used to,” the Chicago-based economist said, pointing out that it takes rising tax rates to finance such a large budget.
“But it’s important to answer this as an investor” or advisor, he adds. “And everyone can do themselves a favor by stopping to worry about the Federal Reserve.”