Talking points from the NJ Bankers forum

By Meg Fry
Somerset | Jan 30, 2018 at 11:15 am
From our print edition

The best remarks from the three key speakers at the New Jersey Bankers Association’s 7th Annual Economic Leadership Forum: Wilbur L. Ross Jr., the U.S. secretary of commerce; Lindsey Piegza, chief economist and managing director at Stifel Financial Corp. in Chicago; and Geoffrey S. Greener, chief risk officer at Bank of America.

On tax reform…

“We did not anticipate that more than 2 million American workers would receive special bonuses from their employers that were specifically designated as being due to the new tax bill. That’s a couple billion dollars pumped back into the consumer economy. There are an awful lot of people in this country living paycheck to paycheck, so the idea of a lump sum $1,000 is a pretty good thing.” — Wilbur L. Ross Jr.

“Tax cuts and job acts signed into law now, from an economic standpoint, are pieces of legislation intended to inflate the household balance sheet. The fastest way to get the economy back on track is to put additional cash in consumers’ pockets so that they can go out into the marketplace and buy. … But consumers are likely to see a lot of the additional wealth from a reduced federal tax bill offset by rising tax bills on a state and local level, rising health care costs and a lack of meaningful income growth.” — Lindsey Piegza

On infrastructure…

“I think what the (President Barack) Obama administration missed is that one of the big problems in infrastructure is the expensive permitting processes that take 10 to 12 years, even in the private sector. … Our aim is to try to cut that down to a one- or two-year period. A lot of projects are not even undertaken because elected officials are not in office for 10 years. So, to start a project now, to raise taxes on people now for a project that your successor will get credit for, doesn’t do much for the … official.” —Ross

On technology…

“Technology is tremendously empowering and exciting, and we want to be able to interface with our customers how they want, but a lot of it is new, and there may be things people have not thought of. … Cryptocurrencies and digital transfers and payments, for example — we think those technologies have many applications and value for the economy — but I personally think that their anonymous natures are bad. Who out there wants to transfer money and not have any idea who or where it’s going to, and for what purposes? … We must constantly think about what we might be missing, because the single most important thing that bankers have is that people trust us.” — Geoffrey S. Greener

“One area that we do expect to see increased business investment is in technology, as corporations continue to move further toward the process of automation. This could jump start or at least support productivity levels in this country, which have languished for the better part of the past decade, but automation also may serve to perpetuate stagnant labor market conditions, particularly in terms of wage growth.” — Piegza

On the labor market…

“A 4.1 percent level of (nationwide) unemployment is pretty impressive and a significant decline from the peak of nearly 10 percent in the aftermath of the Great Recession. … But that number doesn’t include the millions of Americans who have dropped out of the labor force completely, dragging down the participation rate to a multidecade low. I always say it is very easy to get the unemployment rate down to zero if nobody is looking for work. … While nearly 10,000 baby boomers per day reach retirement age, putting ever-increasing pressure on government expenditures, the vast majority of these dropouts were only 20 to 55 years old. Unless they are independently wealthy, we expect them to come back into the labor market at some point to put upward pressure on that unemployment rate.” —Piegza

On complacency and callousness…

“The thing I am most worried about is, while the recovery has been strong, we have seen people for some time now relaxing and doing things that we do not think are (financially) responsible. Is there a risk that inflation rises in unexpected ways and ties the hands of central banks around the world? Will that break the back of the rising tides around the world?” — Greener

“In order to sustain the consumer long term, we need organic job and income growth. We started to see a little bit of upward traction during 2015 and 2016, but we are still talking about modest growth, currently at 2.5 percent. If there was such a minimal amount of slack out in the labor market, as a 4.1 percent (nationwide) unemployment rate implies, we would easily be talking about 3.5 percent wage growth. But we are not at this point.” — Piegza On energy reform… “The war on coal is over. Part of the tax proposal was to take care of the huge reserves of hydrocarbon in Alaska. … They haven’t started drilling, but coupled with permitting a lot of offshore drilling, that will really change the energy map. We still import millions of barrels of oil per day. We are not yet self-sufficient, but all these moves will bring us closer to being so and bring down the trade deficit in and of itself.” — Ross

“The average American family saved nearly $1,000 over the past 12 months, thanks to lower-cost fuel. While that is not life-changing money, that is a significant amount of additional discretionary income to go out into the marketplace and do what they do best. What is so great about the American consumer is that, when we save $1,000, we spend $2,000. That is unsustainable footing going forward.” — Piegza

(READ MORE from ROI-NJ on the economic forum.)

On trade agreements…

“One of the major tasks that President (Donald) Trump has given us is trade enforcement. The World Trade Organization and various treaties that we have with other countries all specify the rules of the road for commerce, and yet we have in place more than 400 orders against nearly 40 countries — about 20 percent of which we put in over the last year — for violations of those rules. We feel that, since it is so important and so complicated to reach a trade agreement, at the very least, we should be able to expect people will follow the rules. … We favor free trade; the problem is free trade is like a unicorn in the garden. It really doesn’t exist. China, Europe, Japan, South Korea — all those big trading partners have very high tariff barriers and very formidable non-tariff trade barriers relative to the U.S. We are the least protectionist major country and our problem is that we gave away so many concessions unilaterally that now we must go back and try to correct history by taking back some of those things. … Now, something like the North American Free Trade Agreement simply needs reform. Prior to NAFTA, we had an annual trade surplus with Mexico, generally ranging between $4 billion to $5 billion per year. Since then, we’ve had consistent trade deficits. What would you guess is the accumulative trade deficit that we’ve had with Mexico alone since NAFTA came to be? It’s more than a trillion dollars. That gives you some perspective as to why we feel an urgent need to make some modifications. It is true that total trade has grown a lot between the U.S. and Mexico, but that is a pretty grown-up size deficit. Think how much better off the country would be if that trillion dollars instead went into our infrastructure.” — Ross

On global uncertainty…

“Wild cards that could potentially affect the economy on an international stage now include our relations with Russia, the threat of nuclear war, rising tensions in the Middle East, instability in Europe and changing commodity markets. At home, the Trump administration is still working on building a wall between us and Mexico, deporting immigrants with criminal backgrounds, figuring out what to do with Deferred Action for Childhood Arrivals, repealing and reforming the Affordable Care Act and building infrastructure, just to name a few.” — Piegza

“The reality is that what might’ve been a great idea yesterday may not be today because of how dynamic the world is. … The world changes very quickly and there are very different outcomes if you list all the ways you can win or lose versus if you start with only the stuff you are worried about at any point in time. … There’s obviously a lot of geopolitical risks out there, a lot of hotspots and potential uncertainty about how things may evolve. … So, we now tend to look at many different scenarios, and the importance of that is not always the scenario itself, but that we are challenging ourselves to think outside of the box.” — Greener