Making predictions for the Puget Sound region’s economy got a whole lot more complicated after the election. Things are going very strong now but risks and disappointment await.
Call 2017 the Big Question Mark year.
In eight years of doing these New Year outlook columns here, I’ve never seen the nation facing more uncertainty. This complicates the view for Seattle and the Puget Sound region, too.
The source of the ambiguity that faces us is, of course, the outcome of the election.
In a normal climate of Republicans controlling all branches of the federal government, one could get a pretty good idea of priorities by visiting the website of the Heritage Foundation.
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Sure enough, the premier conservative advocacy arm offers a “comprehensive policy agenda,” including cutting spending, “reforming” Social Security and Medicare, cutting taxes, rolling back regulation and eliminating Obamacare.
And much of this may happen, for better or worse. But with Donald Trump, we have a president who is outside of any historic norms for the nation’s chief executive. Anything could happen.
He will be inheriting an economy that is doing well. Unemployment at the end of 2016 was below 5 percent, in “full employment” territory. Growth is steady. Household income has begun to improve broadly.
Things are even better in metro Seattle. The Seattle-Tacoma-Bellevue unemployment rate for October, the most recent data available for the metropolitan area, was 4.4 percent. In November, King County’s rate hit 3.9 percent. Gold-standard studies rate Seattle as one of the best-performing metro economies in the nation.
Regular readers know I don’t make predictions (“The future ain’t what it used to be,” as Yogi Berra said). Instead, I lay down markers to watch. This year, they will all be in the form of questions.
How badly will the regional economy be affected by Boeing’s slowdown?
My colleague Dominic Gates has written about how the company is preparing for job and cost reductions in the face of an order slowdown. It is also working to position itself competitively when demand resumes.
In the past, this would have been a prescription for a broader slowdown. But the Puget Sound economy is much more diverse today and firing on all cylinders. Although there will be pain, this larger expansion should prevent too much damage.
This cautious optimism is tempered with a very big caveat, however …
Will Donald Trump follow through on his promises to confront China on trade, even imposing tariffs?
For trade-dependent Washington, this is the $86 billion question (the value of the state’s merchandise exports in 2015). For Boeing, at least as we know the company today, it verges on the existential.
Earlier this year, Boeing executives predicted China would need $1 trillion worth of commercial airliners over the next 20 years. The company has worked hard to establish itself in China, which also buys from Airbus and is pushing to create its own world-class commercial-airline manufacturer.
If the Trump administration were to raise tariffs, Beijing has promised to retaliate tit for tat. One of the biggest targets could be Boeing, giving a long-term advantage to Airbus and putting thousands of Puget Sound area jobs at risk.
If the situation escalated into a trade war and drew in other countries, Washington would be a big loser. Any reset that “brought jobs home” would take years to make up for those lost in poorly thought-out protectionism.
How much can the Trump administration hurt Seattle?
The Emerald City is one of several progressive urban outliers in the new era of conservative power. It’s no secret that the right is hostile to federal aid for cities and urban needs (hence the reflexive opposition to rail transit).
Donald Trump is from New York City and likes to be associated with skyscrapers. He’s also talked of spending $1 trillion on infrastructure but has since backtracked.
His choice of the wildly unqualified Ben Carson to be Secretary of Housing and Urban Development is a discouraging early sign. Another is his Labor Secretary nominee, Andrew Puzder. The fast-food mogul opposes raising the minimum wage — Seattle’s touchstone issue — and is no friend of unions.
The new administration could not only stop the Obama administration’s TIGER grants (short for Transportation Investment Generating Economic Recovery) but also cut federal funding to Seattle and other self-proclaimed sanctuary cities. One of Trump’s consistent pledges has been to clamp down on illegal immigration.
Protest all you want downtown. The other Washington won’t be moved, and has tremendous power.
How will the winners and losers shake out?
We’ve seen this movie before: tax cuts, deregulation, crony capitalism. It at least coexisted with the Reagan boom but ended in disaster in 2008. (No, poor people getting home loans did not cause the Great Recession).
Once again, the wealthy — and the region has a large cohort — will see additional income. Locally based companies might find themselves less “burdened” by federal regulations. Weakening antitrust enforcement could cut both ways, either allowing our giants to grow or causing local companies to be absorbed, with the loss of jobs and headquarters.
I don’t see how deregulating banks will make America great again. But maybe that’s just me. Bank customers will lose their champion in an independent Consumer Financial Protection Bureau, if Republicans get their way.
Most important for the future, climate change won’t be constructively addressed. The economic costs, including to our fisheries, is only one price our offspring will pay.
As for social justice, one of Seattle’s big issues? That one I can answer: It’s not even on Trump or Congress’ radar. And whether the new regime can help working-class whites is maybe the most pointed question, especially if cuts to social programs are coming.
I wish you all a Happy New Year. We’re headed into an unusual, even unprecedented, experiment.