Trump’s spending agenda could be a ‘recipe for disaster’, says NYU finance professor

Reporting by Willem Marx, Writing by Karen Gilchrist
The problem for President Trump is implementing his agenda: Expert
The problem for President Trump is implementing his agenda: Expert

President Donald Trump's spending reform agenda could turn out to be a "recipe for disaster" and a significant risk to the U.S. economy if more attention is not paid to the implementation process, NYU finance professor Edward Altman has warned.

Describing the policies as "risky," Altman said that President Trump and some of his advisors are too reliant on as yet unrealized growth in order to fund proposed tax cuts, which could hurt the economy.

"We have to be careful, very much, of overheating the economy very quickly with infrastructure financing and lower taxes," Altman told CNBC Thursday.

"That, in many cases, could be a recipe for disaster if, in fact, the deficit financing and the amount of debt that has to be raised to finance it is excessive."

President Donald Trump speaks about the gas attack in Syria as he and Jordan's King Abdullah (not pictured) hold a joint news conference in the Rose Garden after their meeting at the White House in Washington, April 5, 2017.
Yuri Gripas | Reuters

"I personally think that's going to be risky because the timing is not going to be coherent. You spend money quickly, you raise a lot of debt, but it takes time for that to permeate down into the economy."

The president, however, has a tough balance to strike, Altman noted. Failure to implement the proposed reforms could hurt markets, particularly in the near-term, after having been buoyed by the prospect of more accommodative business policies.

This pressure has become especially acute since the failure of the Republican's health-care bill – seen by many as a litmus test for other overhauls.

"I wish him luck – but so far his track record is not very good," Altman said.

"If that continues with tax policy, which is very complicated, then I think markets are going to say 'things aren't going to turn out as expected' and I think we're going to find that volatility that we were expecting," he continued.

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