How great will America be under President Donald Trump? It depends on when you ask.
Since the election, many economists have upgraded their projections of economic growth over the next two years. They are betting that Trump’s pledge to cut taxes will put more money in people’s pockets and encourage businesses to invest, while his support for infrastructure spending will create jobs and boost productivity in the long run.
Still, many economists say that there are fundamental reasons that the economy can’t grow much faster than it is now. For example, the baby-boom generation is retiring, resulting in a smaller workforce, and technological investments may not be creating the same numbers of jobs as in the past. In addition, they warn that some of Trump’s proposals — such as steep tariffs on Chinese and Mexican imports — could backfire and potentially throw the economy into another recession.
Here’s a look at how Trump’s promise of economic growth has shifted:
Trump released the initial version of his plan to overhaul the nation’s tax code, during a news conference at Trump Tower in New York. His proposal slashed the corporate tax rate from 35 percent to 15 percent and collapsed individual tax rates into three brackets, with the highest rate falling from 39.5 percent to 25 percent.
During the news conference, Trump gave this forecast of how much his tax plan would boost growth:
“We're looking at a 3 percent, but we think it could be 5, it could even be 6. We're going to have growth that will be tremendous.”
Let’s dissect that for a moment. Trump first suggested that the impact of his tax plan — which the nonpartisan Tax Policy Center estimated would cost a whopping $10 trillion over the next decade — would boost growth only modestly to 3 percent. But he then dismissed that estimate as too low and provided another forecast of double that amount.
It’s worth noting that a Trump rival for the Republican nomination, former Florida governor Jeb Bush, had recently vowed to restore economic growth to 4 percent.
Trump eventually had to scale back his tax plan’s hefty price tag: The top individual rate in the plan is now 33 percent, individual deductions are capped, and “pass-through” businesses get a smaller tax cut.
Yet the downsized proposal came with similar growth projections. A fact sheet distributed by the campaign estimated that the economy would expand at an annual rate of between 3.5 percent and 4 percent following the overhaul of the tax code, compared with the 3 percent rate Trump originally had cited for the more aggressive package:
“The Trump campaign's economist estimates that the plan would conservatively boost growth to 3.5 percent per year on average, well above the 2 percent currently projected by government forecasters, with the potential to reach a 4% growth rate.”
In a speech in New York, Trump focused on the higher figure — and again suggested it wasn’t high enough.
“That's why I believe it's time to establish a national goal of reaching 4 percent economic growth. And my great economists don't want me to say this, but I think we can do better than that. Now, they're upset. They'll be very upset. But I think we can do, and maybe substantially better than, that.”
At the presidential debate against Democratic rival Hillary Clinton in Las Vegas, Trump doubled down on the potential for growth to reach 6 percent — well beyond what most economists say is sustainable or even possible:
“But we're bringing it from 1 percent up to 4 percent. And I actually think we can go higher than 4 percent. I think you can go to 5 percent or 6 percent.”
After his election, Trump nominated veteran Wall Street investor Steven Mnuchin to lead the Treasury Department. Mnuchin would be responsible for implementing Trump’s economic agenda, pushing for an overhaul of the tax code and other measures to deliver on the promise of supercharged growth.
But on CNBC, in his first interview as the nominee, Mnuchin played down Trump’s growth forecasts. And he reestablished the 3 percent baseline for growth that Trump had abandoned more than a year before:
“I think we can absolutely get to sustained 3 to 4 percent GDP, and that is absolutely critical for the country.”