We have “alternative facts” and now we have alternative math.
The Trump administration has proposed changing how the balance of payments number is calculated in order to support their case for trade restrictions and tariffs (taxes on imports).
Now the administration is projecting 3% annual growth in GDP for the next three years. That’s substantially higher than the 1.9% estimate by the nonpartisan Congressional Budget Office for average growth over the next decade. At best, the CBO estimates 2.3% growth in 2017, which is in line with the estimate from the IMF. Kiplinger is forecasting 2.1% growth. The Conference Board has a 2.2% forecast for 2017.
The last time tax cuts spurred major economic growth was in 1962, under a very different economic environment. The record since with cuts has been erratic and overall much less productive. Giving people money that they then invest in overseas markets does nothing for the US economy.
Why does the higher figure matter?
Higher growth means higher tax revenues to the government. These higher revenues would offset reductions in tax rates for corporations and the wealthy. Without the higher revenue, the current proposals aren’t “revenue neutral” and will produce a massive increase in the Federal deficit.
Which is precisely what fiscal conservatives don’t want to see.
- Nick Thornton, “Economist cautions against lavish growth projections,” Benefits Pro, 24 February 2017. http://www.benefitspro.com/2017/02/24/economist-cautions-against-lavish-growth-projectio?kw=Economist%20cautions%20against%20lavish%20growth%20projections&et=editorial&bu=BenefitsPRO&cn=20170227&src=EMC-Email_editorial&pt=Daily
- International Monetary Fund, “World Economic Outlook Update January 2017”. https://www.imf.org/external/pubs/ft/weo/2017/update/01/
- “Kiplinger’s Economic Outlooks,” Kiplinger, February 2017. http://www.kiplinger.com/tool/business/T019-S000-kiplinger-s-economic-outlooks/
- The Conference Board, “The U. S. Economic Forecast,” 8 February 2017. https://www.conference-board.org/data/usforecast.cfm