Business Maverick

Business Maverick

Trump Forecasts Growth Above 3% This Year. Economists Disagree.

US President Donald Trump. (Photo: EPA-EFE / Michael Reynolds)

President Donald Trump assumes economic growth above 3% this year in his annual budget proposal, exceeding mainstream analyst forecasts and other key authorities in Washington.

The White House proposal for fiscal 2021 says gross domestic product growth will climb 3.1% in the fourth quarter of 2020 from a year earlier, followed by 3% expansion in 2021, according to a senior administration official. Growth will step down to 2.8% in the final two years of the decade, in line with prior White House expectations, according to the person who asked not to be named because the proposal is not scheduled to be released until Monday.

The outlook exceeds even the highest estimate of mainstream economists, who see GDP growth easing this year to 1.8%, the median in a Bloomberg News survey of 59 analysts.

Read more: Trump’s $4.8 Trillion Budget Would Increase Debt, Cut Safety Net

The projection also exceeds levels forecast by the Congressional Budget Office, a non-partisan arm of the legislature. The agency’s latest 10-year outlook sees growth decelerating from 2019 to 2.2% in 2020, and coming in just below that for the next decade. Federal Reserve officials are forecasting 2% growth in 2020.

GDP rose 2.3% in 2019, trailing Trump’s prior promise of 3.2%. The latest budget proposal cites reasons for the miss including the U.S.-China trade war, struggles at airplane-maker Boeing Co., a strike by thousands of workers at General Motors Co. and historic flooding in the Midwest, according to the administration official.

The White House economic assumptions are predicated on the adoption of policies the administration has advocated for, which are unlikely to make it through a divided Congress in an election year. The forecasts also assume that the tax cuts enacted in 2017 will be extended.

U.S. growth is generally holding up as consumers, supported by job gains that blew past forecasts in January, continue to drive the record-long expansion. But the pace of expansion has been gradually slowing since 2018 amid a slide in business investment — which declined for the third straight quarter at the end of last year — and fading effects of the tax cuts.

Meanwhile, the U.S. budget deficit is set to expand to $1 trillion this fiscal year for the first time since 2012, in the wake of mass government spending to steady the economy under President Barack Obama. It would also be the first year of such high deficits alongside a tight labor market since World War II.

The Wall Street Journal earlier reported the budget details.

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