LOS ANGELES (CBSLA.com) — The presidential election has thrown California’s economic future into turmoil, but maybe for the better, according to the UCLA Anderson Forecast released Tuesday.
President-elect Donald Trump’s hardline stance on immigration and trade policy could cost the state any potential federal spending on infrastructure and upgrades. But on the other hand, if he succeeds in increasing spending on defense, California could benefit greatly, according to the report.
Senior economist Jerry Nickelsburg noted in his report on the state economy that Trump’s proposed increase in defense spending “will be disproportionately directed to California as sophisticated airplanes, weaponry, missiles and ships require the technology that is produced here.”
“Moreover, there are few places to build the proposed 150 new warships, and San Diego is one of them,” Nickelsburg wrote. “Regionally, we expect a positive impact in the Bay Area and in coastal Southern California.”
California could also benefit from potential federal spending on infrastructure repair and upgrades, but Trump’s stated intention to limit funding for “sanctuary cities” — a label generally placed on cities like Los Angeles and San Francisco, which are regarded as friendly to immigrants without visas — could throw the impact of such an effort into question. Nickelsburg noted, however, that Republicans may not be able to get an infrastructure-funding package approved without support from the state’s sizeable congressional delegation, meaning there would have to be some assurances of funds being spent locally.
Trump’s proclaimed intention to re-negotiate trade deals — most notably with China and Mexico — is also a wild card for the local economy.
“It may be that the stick works and the trade deals are re-negotiated with a larger volume of trade going both ways,” Nickelsburg wrote. “It is hard to say, and not the most likely outcome we see with our national forecast. Quite possibly there will be a reduced volume of trade, and depending on whether or not the stick is swung, maybe a greatly reduced volume of trade.”
Despite all of the questions, Nickelsburg said the new forecast for the coming years is “slightly higher than our previous one through the end of 2017.”
“This reflects the stimulus assumed in the national forecast, particularly through the defense appropriations,” he wrote. “The weakness relative to the U.S. after that reflects the fact that California, having already reached near full-employment will benefit less from further stimulus than rust belt states and the fact that deportations of unskilled workers will impact food harvesting and food processing.”
In a separate report, UCLA Anderson Forecast economist William Yu suggested that Trump’s vow to deport immigrants with criminal records living in the country illegally could have a notable impact in Los Angeles County, which Yu estimated houses at least 1 million undocumented immigrants. An exodus of some undocumented immigrants is expected during the Trump presidency because of enforced immigration laws, the continuing rising costs of housing and reduced employment due to the incremental rise of minimum wage to $15.
It’s not yet known what Trump’s policies on high-skilled immigration will mean for Los Angeles, and the president-elect could even expand immigration of such workers to fuel growth during his administration, Yu’s report noted.
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