“Trump’s Rosy Economic Growth Forecast Isn’t Crazy”

Trump’s Rosy Economic Growth Forecast Isn’t Crazy
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What’s not to like?

President Donald Trump’s new budget proposal makes some heady economic projections — 3% annual real economic growth for the first half of the decade — to justify his policies and make the budget deficit look smaller than it might otherwise be. That’s a lot higher than mainstream economists at the Federal Reserve and Congressional Budget Office believe is likely based on productivity gains, an aging population and slower growth in the labor force. But Fed and CBO forecasts often are wrong, and during much of the past decade economists and policy makers have misjudged the extent of slack in the U.S. labor market. An aspirational economic growth projection, even if it may not be realistic, is a good reminder that we shouldn’t underestimate how much economic growth is possible in the U.S. In contrast to the Trump administration’s forecast, the Fed and CBO are projecting growth of little less than 2%. Their reasoning is straightforward — productivity growth since the Great Recession has slowed, averaging about 1% a year during the past decade. Forecasters also point to slower growth in the labor force, which tends to put a damper on economic growth. But the same kind of analysis three years ago at the outset of the Trump administration lowballed the economic growth that followed. The Fed’s economic projections for 2017 through 2019 made at the end of 2016 estimated that real gross domestic product growth would come in at […]

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