Trump's hopes of stimulation could be frustrated by congressional and 2020 policies

President Donald Trump presides over the biggest federal deficit ever recorded outside of a recession, which may not block a new stimulus package, but carries many political risks, according to J.P. Morgan Chase.

The federal deficit is projected to reach $ 1 trillion next year – and could even increase if the current slowdown turns into a real slowdown.

Referring to earlier recessions of 1990 and 2001, JP Morgan estimated that a moderate recession that would increase by about 2 percentage points the unemployment rate would increase the deficit by 3.6% of gross domestic product.

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"Although this is not entirely risk-free, the federal government would have compelling arguments for borrowing money to stimulate the economy, especially in a world of interest rates. low and an inflation that would likely coincide with a recession, "analyzes Jesse, an analyst at JP Morgan. Edgerton wrote in a research note this week.

However, the biggest challenges of the Trump administration are political in nature, the bank said, as partisan divisions in Congress and the next general election could make legislation difficult.

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According to J.P. Morgan, Trump would face some resistance from his own Republican party – but the biggest obstacle would be the Democrats, who do not want to give him a victory that could help him to represent himself.

"Perhaps the most crucial is whether Democratic lawmakers would support an economic stimulus bill that could be considered beneficial to President Trump," Edgerton said.

Trump could try to boost the US economy through leadership action, the economist said. However, according to Edgerton's analysis, circumventing Congress to achieve the effect of lower taxes would not have a significant effect on the US economy.

"As an annual tax cut of $ 20 billion represents less than 0.1% of US GDP, we would expect de minimis effects," he wrote.

This leaves lawmakers struggling with legislation as the most effective way to boost the economy, according to the economist.

Although partisan tensions were high, as Democrats tried to take over the White House, Edgerton said it was possible for bipartite laws to be passed. He cited the precedent that President George W. Bush had worked with a democratic congress to pass a stimulus bill in 2008.

"Although such bipartite cooperation may seem oddly charming today, it has not prevented the recession of 2008," he added.

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