President Trump’s optimism and big predictions of economic growth look like exaggerations and lies when you look at the actual numbers and projections by the non-partisan congressional office.
President Trump staged a major announcement last month announcing the economy grew at 4.2% in the most recent spring quarter. During the press event, Trump insisted that the 4.2% was just the beginning and predicted even higher economic growth going forward as a result of his administration’s policies.
Trump is making his economic growth prediction chose to ignore warnings from independent and perhaps his own White House economists that the 4.2% growth in the last quarter was the result of one-time surge in agriculture exports due to concerns the administration would impose tariffs on Chinese imports that would result in the retaliatory 25% tariffs on U.S. agriculture imports to the second largest economy in the world.
Despite Trump’s lofty claims, the U.S. economy is projected to grow by 3.1% this year, fueled by both government spending and tax cuts according to Monday’s report from the nonpartisan Congressional Budget Office (CBO).
While economic growth of 3.1% is considered robust by economists, most experts including CBO are predicting that the U.S. economy to slow down next two years and during the next decade as Trump’s temporary government policies expire, according to the Monday CBO’s report.
The CBO projects that economic growth will slow to 2.4% in 2019 and to a paltry 1.7% in 2020, staying at about that level over the next decade, the CBO projected.
If the CBO’s predictions regarding U.S. economic growth this year are proven correct. The U.S. economy will end 2018 having jumped to 3.1% from 2.6% growth in 2018. Still, 3.1% isn’t that impressive when one considers that annual growth rate rose 2.2% after the aftermath of the 2008/9 financial crisis and the Great Recession that followed.
Monday’s CBO’s report strongly indicates suggests the U.S economy is being temporarily stimulated, largely due to the sharply increased government spending passed by Congress and signed into law by President Trump this spring. The CBO report also cites the Republican tax cuts passed last fall as fuel for this spike in U.S. economic growth. While the tax cuts for corporations and the income earners were passed into law forever. The more modest, in fact very small income tax cuts provided for in the GOP tax bill are set to expire in a decade, but Republicans insist a future Congress is going to extend them further in the future.
A senior economist at S&P Global Satyam Panday interviewed and quoted by the Washington Post as saying about the CBO report further dashes President Trump’s hope for economic 4% or 5% growth going forward in 2019 and beyond…
“You’re going through a nice sugar rush provided by the federal stimulus, which is going to slowly come back down next year,” and “We’re seeing a near-term positive effect, but these policies are not going to have a big impact on the longer-run growth.”
The big concern for most critics regarding the Trump’s predictions about the U.S. economy and his administration’s policy is there no indication in the numbers that are unfolding most American workers are in a losing fight with inflation.
Wages at a time of improved economic growth are not keeping pace with increased costs of food, products, and services. In fact, the wages of most American workers have barely budged this year, suggest wage growth is being wiped out entirely by inflation.
Trump administration official like Larry Kudlow pointed to the one carrot in the CBO report that offered the optimistic for employees, projecting fast growth of an index that measures workers' wages and benefits. According to the CBO report...
“The increased demand for labor and competition for workers boost the growth of hourly labor compensation.”
The optimism for upward wage pressures is not shared by all economists. Some economists are skeptical that wages are going to take off anytime soon. The point to the tight labor market that already exists and that wages still remain stubbornly low. Trump heading into both the 2018 midterms and looking forward at his re-election in 2020 need to find a way to boost wage growth quickly.
Joseph Brusuelas, chief economist at RSM, a tax and consulting firm quoted by WPO said...
The wage growth individuals want to see [is] just not going to happen.”
wage models used to produce gains for workers are not working,”