The parts of the U.S. economy that are still far too exciting

By Ana Swanson

A worker places maple lumber panels used to manufacture bowling pins into machinery at the QubicaAMF Bowling Worldwide LLC facility in Lowville, New York, U.S., on Thursday, March 30, 2017. Photographer: Luke Sharrett/Bloomberg

Not many people say their goal in life is to be boring. But that’s the case for John Williams, the president of the Federal Reserve Bank of San Francisco, who is charged with overseeing the financial health of everything West of the Rockies.

Things in the economy have been far too exciting in the last decade, says Williams. And while he says the economy is generally on a strong track today, there are areas he’s watching closely — including the effect of government policies proposed by the Trump administration.

While many have emphasized the potential boost to growth from tax cuts and other measures the administration has discussed, Williams says other measures could pose a potential risk to growth, like trade restrictions or cuts to Medicaid.

This interview has been edited for length and clarity.

President Trump’s budget proposal released last week proposed pretty dramatic cuts to programs that help the poor, including Medicaid. What would that mean for the U.S. economy?

First, I don’t know what will happen in fiscal policy. There are a lot of proposals, but what really matters is what Congress enacts and the president signs. Second, some of these proposals would boost growth in the short run— like more spending on defense. But other changes that have been talked about, including trade restrictions, would have a negative effect in the short run.

Significant cuts in Medicaid or other programs affect money in people’s pockets that gets spent pretty much dollar for dollar. So cutbacks in spending that go to lower-income people have the biggest effect on the short-run of the economy. It’s different for tax cuts, especially for …read more

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