Mohamed El-Erian, Allianz SE’s chief economic adviser, said he’s become less confident that President Donald Trump has properly prioritized his plans to reverse a period of relatively low growth in the U.S.
“I think the U.S. is falling into the trap of getting the sequencing wrong,” El-Erian said Thursday in an interview on Bloomberg Television, building on a view he’s expressed for months. “If you were an economist, you wouldn’t have started with health care first. You would have started with the pro-growth measures.”
Trump has struggled to win support for a measure to scale back President Barack Obama’s health policies. The plan that eventually passed the House of Representatives has met resistance in the Senate, where Trump’s party holds a narrower majority. And the Congressional Budget Office said Wednesday that the legislation would increase the number of uninsured by 23 million.
Republican lawmakers have also been uneasy with Trump’s proposal this week for a federal budget that calls for $3.6 trillion in spending cuts that would mean steep reductions in food stamps, Medicaid health insurance payments and disability benefits. El-Erian said the proposal suffers from a “design problem” in that it wasn’t put together with a focus on the right goals.
“This budget will go nowhere at all,” said El-Erian, who is also a Bloomberg View columnist. “And we’re going to lose an additional few months in designing and starting to implement a growth strategy. So I’m getting more worried.”
The U.S. economy expanded at an annualized rate of just 0.7 percent in the first quarter, the slowest pace in three years. Trump campaigned on plans to lift the pace to 3 percent or more, and his surprise election in November led to a rally in stocks.
El-Erian said there is a path to higher growth, and it would involve some of the issues that were central to the presidential campaign. The economist has called for reforming the tax code and improving infrastructure. El-Erian said he’s been disappointed in the absence of initiatives to retool the workforce to adapt to changes in technology and demographics.
“I think that’s a tragedy,” he said, adding that the U.S. should adapt more nimbly to global trends.
“China does this really well. China starts with a vision and says, ‘I don’t know every single step of the way, but I know where I want to end up,’ ” according to El-Erian. “This adaptation is really important, but you’ve got to have a North Star and you’ve got to tell people what that North Star is.”
This article was provided by Bloomberg News.