Fed’s Kaplan sees risk Washington could derail the expansion

In an interview with MarketWatch, Kaplan said he was worried about policy, such as on trade or healthcare, that would cause consumers to pull back. The renewed capacity of consumers to spend, eight years after the financial crisis, has been the “key underpinning” to the better economic outlook, he said. “We’re finally in a situation where the consumer capacity to spend is in pretty good shape,” said Kaplan, who is voting on the Federal Open Market Committee this year for the first time. “I’m frankly more worried about and watching to make sure we don’t enact policies or some uncertainty that might cause consumers to take a little pause,” he said. For instance, seniors may curtail spending if they see they may have to pay more for their health care. Kaplan said he was also worried actions to roll back trade openness might cause U.S. jobs to be lost to Asia, especially if companies have to undo supply chains and logistics that have helped them become productive. He didn’t specifically name President Donald Trump, who has talked about the need to get tougher on trade but hasn’t to date enacted policies to do so. Kaplan defended the existing U.S. trade relationship with Mexico, saying it has improved U.S. competitiveness and added jobs. “I’m hoping to see some segmentation of how we think about trade. We need that. We could actually hurt job growth,” he said. And any retaliation could costs jobs, he added. Kaplan said Congress could also do positive things like cutting red tape and boosting spending on infrastructure. Corporate tax reform, if done right, might boost investment, he said.