Washington, Feb 19 (TNS): US President Donald Trump is beginning his second year in office with a high-risk strategy juicing the US economy at a time when it already looks pretty healthy. As his latest budget, released last Monday, makes clear, Trump wants growth of three per cent or more a year for the next seven years, a feat that hasn’t happened since Ronald Reagan was president in the 1980s.
Most economists say Trump’s economic dream is virtually impossible. The latest Survey of Professional Forecasters, for example, doesn’t predict growth will hit 3pc at all in Trump’s first term.
The United States is in a different place today than it was three decades ago, many say. The population is much older now, making it more difficult to sustain higher growth, especially without additional immigration or some sort of technological revolution that would make American workers the most productive they have been since the 1960s. Increasingly, Wall Street banks and independent economic researchers are starting to flag doubts about the health of the Trump economy, further fuelling the belief that a downturn could hit in 2019. But Trump doesn’t like being told no. He’s made a career out of defying the odds, and his “Trumponomics” recipe of cutting taxes and hiking spending is meant to spur so much additional business investment that productivity can hit record levels. In theory, that would then boost growth and wages further.
His budget predicts the longest expansion in US history, with moderate inflation and unemployment falling to 3.7pc in 2019, the lowest level since 1969. Some economists, however, say the more likely result is growth picks up for a year or so and then a downturn hits. By then, the US government would be even deeper in debt with less money to spend to revive the economy.
This is a joke,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. “I would love if we had 3pc growth for two years, let alone seven years, but we have an aging population and there is no plausible story I can tell where we’re on a path towards sustained economic growth at that level.”
Friction over these contrasting views of how Trumponomics is likely to play out is causing some of the stock market whiplash. There’s broad agreement that this year looks good. There’s a lot of disagreement about what comes in 2019 and beyond.
The stock market gyrations we’re seeing now might be a foreshadowing of some kind of downturn,” said Kristina Hooper, chief global strategist at Invesco. “It seems likely before the end of 2019, we will probably see some kind of economic slowdown.
