Budget Lab Panel Examines Threats to U.S. Economic Growth

The Budget Lab at Yale hosted a Nov. 12 panel discussion on how current politics may threaten the U.S.’s long-term economic trajectory. 

Moderated by Josh Barro, New York Times contributing opinion writer and creator of the newsletter “Very Serious Josh Barro,” the panel featured Cristina Rodríguez ’00, Leighton Homer Surbeck Professor of Law; Eric Van Nostrand, former assistant secretary of the Treasury for economic policy; and Martha Gimbel, executive director of the Budget Lab.

The strength and stability of the U.S. economy is understood to depend on stable democratic institutions. “If you don’t have a system of law enforcement that’s based on evidence and a commitment to enforcing the law, but instead is based on personal whim, then you tend to generate instability,” Rodríguez said.

While markets have been sanguine about the administration’s policy and procedural — with notable exceptions around the April 2 tariff announcements — Van Nostrand argued that there are signs of market concern. “My bottom line is that markets do care about this and markets are reacting, but at this point they’re reacting in a kind of under-the-hood way that you have to be a real finance geek to squint and see.”

The U.S. has historically been perceived as being a safer place to invest than other countries, but this may be changing, according to Gimbel. “Corruption is a growth killer, but it’s not the thing I worry about the most. I worry more about how risky we look relative to other countries,” she said. Last year, the Budget Lab published a report showing that even a modest increase to the perceived risk of the U.S. would have significant impacts on GDP growth and economic stability.

Perhaps the most important institution in maintaining trust in the U.S. economy is the Federal Reserve, Van Nostrand argued, since it is structured to be independent from political branches of government. Trust in the Fed, he said, is vital because “credibility is hard-earned and quickly lost. The way Fed credibility has strengthened over the past 30 or 40 years is one of the great triumphs of Western economic policy. It will be very difficult to do that again once it’s gone.”

The Budget Lab at Yale is a nonpartisan policy research center dedicated to providing in-depth analysis of federal policy proposals for the American economy.