Special Briefing: The Road Ahead for the Economy, States, and Localities as Donald Trump and the GOP Take Charge

PANEL OF ECONOMIC, POLICY EXPERTS GAUGE IMPACT OF NEW PRESIDENT, CONGRESS

Special Briefing Panel Examines What May Happen to US Economy, Programs Implemented Under Biden Administration, State and Muni Impact After Trump and GOP Take Charge

Major policy shifts in immigration, taxes, trade, energy, health care, and pandemic-era programs passed under the Biden Administration that look increasingly likely with Donald Trump capturing the White House and fellow Republicans taking control of both houses of Congress for the first time in two years. This sea change holds implications for the economy, Federal Reserve, states, localities, and the $4 trillion municipal bond market, including the possible elimination of the federal tax exemption on most muni bond interest. Panelists explored these issues:

Torsten Slok, partner and chief economist at Apollo Global Management, discussed the big picture for our economy’s short run: “The short version of what’s happening is that the economy is doing really well. GDP growth for the last two and a half years has continued to surprise from the upside.”  Slok did add, however, that “The big issue in financial markets and policymaking continues to be why did Fed hikes not slow the economy down more, why was GDP growth in the third quarter 2.8, and why is GDP growth in the fourth quarter, according to the Atlanta Fed, going to be 3.3.”

Wall Street Journal White House Reporter Annie Linskey discussed the Biden administration’s priorities before the transfer of power takes place: “The primary program that they [the White House] are working on which impacts states and localities is getting money out of the door for the CHIPS Act. It was a $39 billion program, about $30 billion of that is tied up right now in complicated negotiations between the government and companies, and so the Biden administration is working very hard right now to get those negotiations finished.” 

“This brings me to the DOGE effort, where you have Elon Musk and Vivek Ramaswamy out there pounding their chests about how they are going to make all these dramatic cuts.” said former US Representative Carolyn Bourdeaux (D-GA). Bourdeaux continued: “Most of us who have been around the block on budgeting know that it’s really easy to do this in the abstract, but it is very hard to do it when you are actually putting programs on the line.”

When asked about the impact of federal cuts to budgets and programs on localities, Teryn Zmuda, chief research officer and chief economist at the National Association of Counties, added, “When we’re thinking about the effects of any administration and talking about policy changes, cost cuts could really be cost shifts. Sometimes programs are cut but you do have to think how the effect of that is carried out throughout communities.”

“Right now, state and local payrolls are at the highest levels they’ve been ever. We’ve had 3% growth since the great financial crisis, and 2% growth since 2019,” said Eric Kazatsky, head of municipal strategy at Bloomberg Intelligence. Kazatsky explained: “So, as efficiencies have come into the job market, technology has been embraced even by state and local governments, and payrolls has continued to expand.” 

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