Unrealistic growth expectations
The New York Times
President Trump has routinely promised that his policies will generate “supercharged economic growth” of 3, 4, even 5 percent a year, said Neil Irwin. Even if you treat these musings as “presidential bombast,” the White House is depending on such figures to become a reality—and designing economic policies as if they were. Yet such rapid growth would “require productivity improvements not seen in decades and an atypical policy on interest rates.” The administration’s current forecast of at least 3 percent growth through the next decade imagines that by 2028, the economy will have a full $2.8 trillion more in economic activity that year than other projections assume. Such growth would have to come from either workers putting in more hours or from businesses investing in new equipment to make workers more productive. Trump leans on “the second of these—more capital” to justify his optimism, contending that lower taxes and fewer regulations will inject more capital into the economy. But that’s likely a “one-time adjustment.” Once companies have amended their spending and investment in accordance with their tax savings, there’s “no reason to think that capital investment would keep rising as a share of the economy.” Even if new capital spending does supercharge growth, interest rates will rise accordingly. Yet Trump’s projections pretend otherwise and assume that rates will stay relatively low. Economic forecasts are “inherently hard.” But the odds—and facts—are stacked mightily against Trump’s.