There’s skepticism that Trump will be able to get all of these policies through Congress, especially with Rep. Nancy Pelosi (D-Calif.) leading the House.
“Washington is a really hard place to get things done,” said Kevin Hassett, chairman of the Council of Economic Advisers, but he stressed that his biggest concern for growth is Trump’s policies getting rolled back or Medicare-for-all becoming reality.
The report shows for the first time that the White House is predicting a lot weaker growth if all of those new policies do not come through. Growth would be about 2.5 percent in 2022 if no additional policies are implemented, according to White House calculations. By 2026, growth could fall to about 2 percent, the model suggests.
A lot is riding on whether Trump can achieve his promised 3 percent growth. Without it, his tax cuts would add substantially more to the debt than they already have and Democrats would have an easier time hammering his economic track record.
To achieve the higher growth rate, the White House assumes that the individual tax cuts will be made permanent (they’re currently slated to expire after 2025) and that Congress will pass an infrastructure bill “commencing in 2019 with observable effects beginning in 2020,” the report says. While there’s widespread agreement that the United States needs a major infrastructure upgrade, there’s a big gap between the Democratic and Republican visions of what to do.
The report calls it a “key downside risk” to the forecast if Congress doesn’t pass the rest of the president’s agenda.
The 3 percent White House growth prediction — which is used in the president’s budget and has been criticized by outside experts as a “gimmick" — also assumes more deregulation, especially in the finance industry, and a push for “improving self-sufficiency” by placing more work requirements on recipients of government aid. Some of those initiatives might be possible to implement through executive action.
Trump is relying on a strong economy to drive his reelection campaign. He often takes a victory lap about his economic achievements on Twitter and at rallies, touting stock market gains, record-low unemployment numbers and a “booming economy."
Trump repeatedly called the Obama economy, which averaged just over 2 percent growth per year, mediocre, so Trump wants to be able to say he presided over faster economic growth.
Many economists have described the Trump economy as a sugar high. They have predicted that growth will spike after the president passed a large tax cut and drove up government spending, and that growth will return to about 2 percent by 2020 — or that the economy could tumble into a recession.
“We’ve always said 3 percent growth for one year was possible after we gave the economy a lot of stimulus. But you can’t keep giving the economy more stimulus every year,” said Marc Goldwein, senior policy director at a Committee for a Responsible Federal Budget. “There’s nobody that thinks we’re going to be anywhere close to 3 percent growth a year over the next decade.”
The White House has pushed back against the naysayers, arguing that the economy has exceeded expectations since Trump took office and shows little sign of slowing.
“For the second consecutive year, economic growth has either matched or surpassed my Administration’s forecast, and the economy has growth at a 3.1 percent rate over the last four quarters,” Trump wrote in the report.
Forecasting where the economy is headed is notoriously difficult, but Hassett and his team say that their predictions were almost spot on the past two years and that they think many on Wall Street are underestimating the Trump White House again.
“Everyone said we wouldn’t get 3.1 percent,” Hassett said. “We’re relying on the same analysis because nothing has come up which suggests to us it’s not going to happen.”
Hassett says the corporate tax cut, which was the largest in U.S. history, is spurring a business investment boom that will lift the economy for years to come. But others disagree.
“We’ve not seen any meaningful pickup” in business spending “because of the tax package,” former Federal Reserve chair Janet L. Yellen, who headed the Council of Economic Advisers under President Bill Clinton, said in a recent interview with Marketplace. “We had a period of remarkable growth in 2018, probably around 3 percent. That just isn’t sustainable.”