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Trump's policies will not cause recession: Economist

Donald Trump's camp is firing back at a Moody's Analytics assessment that his economic policies will send the United States into recession.

Moody's last week predicted that if the presumptive Republican nominee's proposals went into effect, the country would see a "lengthy recession" that could last up to two years. In addition, the report said the Trump plan would roll up another $11 trillion in national debt, trigger a trade war with China and push unemployment higher.

A pro-Trump economist, though, questioned the fundamental assertions in the report, as well as the objectivity of Moody's chief economist Mark Zandi, the lead author.

"The Moody's report is a partisan document that fundamentally lacks credibility," wrote Peter Navarro, an economics professor at the University of California-Irvine. "It is based on flawed assumptions that the authors admit 'are our own,' and these assumptions grossly misrepresent the Trump campaign's policy statements on the economy, trade, tax reform, and immigration."

Navarro said he examined the Moody's analysis — which resembled critiques from other Wall Street economists — at the behest of the Trump campaign, though he said his response was independent of influence from the campaign. Trump's side did not respond to a request for confirmation that Navarro was consulted.

The response rejects the key assertions of the Moody's analysis.

"Moody's Keynesian and partisan analysis also deeply discounts the supply side stimulus effects associated with the tax cuts themselves," Navarro wrote. "In reality, Trump's tax package will significantly stimulate GDP growth, the rate of job creation, and the tax revenues raised much as the Reagan supply side tax reforms did in the 1980s."

Donald Trump speaks to the media at his Trump International Golf Links in Aberdeen, Scotland, June 25, 2016.
Carlo Allegri | Reuters
Donald Trump speaks to the media at his Trump International Golf Links in Aberdeen, Scotland, June 25, 2016.

Navarro said Trump's aggressive proposed tax cuts are designed to be "revenue neutral," in that they will be paid for through a combination of increased economic growth and closed loopholes and deductions for special interests.

Trump's hard line with China, rather than instituting a trade war, will help create jobs, said Navarro, who painted a scenario in which the two sides actually come closer together.

"Under the threat of Trump's countervailing tariffs, Chinese leaders realize they no longer have a weak leader in the White House, and China ceases its unfair trade practices," he wrote. "In this scenario, American's massive trade deficit with China comes peacefully and prosperously back into balance over time. Both the U.S. and Chinese economies benefit while workers' rights improve along with the global environment."

He also pointed out that Trump would impose a 45 percent tariff on China's goods entering the U.S. only if China refuses to end what the candidate considers unfair trading practices.

Finally, Navarro reserves his most blistering criticism for Zandi, a registered Democrat who has contributed to his party's prospective nominee, Hillary Clinton.

"Over the last eight years, Mr. Zandi has also been an instigator of, and chief apologist for, the failed Keynesian fiscal and monetary stimulus policies of the Obama presidency — a presidency marked by slow growth, stagnant wages, a near doubling of government debt, and a likely recession as Obama leaves office," he wrote.

Zandi declined to comment, and Moody's Analytics did not respond to a request for comment.

Zandi did indicate last week that an analysis on Clinton's proposals is forthcoming, though no date has been set.