Recent federal tax and fiscal proposals are more likely to balloon the debt than grow the economy, according to BlackRock’s Larry Fink.
Fink, CEO of the world’s largest asset manager, told attendees at the Morningstar Investment Conference on Friday that tax and spending policies proposed by President Donald Trump would not be successful at countering broader demographic and economic trends, and instead could cause “explosive” deficits.
Fink spoke just after the Commerce Department reported a paltry 0.7 percent GDP growth in the first quarter of 2017. He predicted 2 percent to 2.5 percent GDP growth for the year, arguing that the post-election market euphoria is not universal.
“Animal spirits are great for investors, but that has not transferred to the CEO suite,” said Fink, who noted that most developed economies are now growing faster than the U.S. “We’re growing slower than France; that is pretty terrible.”
Even proposals to allow corporations to repatriate foreign-held assets at a lower tax rate is more likely to benefit investors than the economy as a whole, said Fink, as most companies would use repatriated assets to fund dividends and stock buybacks.
Proposed immigration policies and unsteady foreign policy may have more economic consequences, said Fink, impacting tourism in the near-term and dampening demographic growth long-term..
Fink also discussed BlackRock’s shift away from traditional asset management and towards a digital future, estimating that within five years as much as 30 percent of the company’s annual revenues could come from technology.
In his keynote conversation less than a day after Vanguard founder Jack Bogle criticized publicly owned asset managers, Fink defended BlackRock’s corporate structure and business model, arguing that it has required the company to be innovative and more responsive to its clients. “I am convinced we are who we are because we’re public.”
In his videotaped comments, Bogle said that companies like BlackRock couldn’t possibly untangle the conflict between their fiduciary duty mutual fund asset owners and their responsibility to their public ownership.
Disagreeing, Fink argued that publicly owned companies manage the conflict between customer and ownership every day.