On the heels of its new budget plan with high economic growth projections that have been widely questioned, the Trump administration last week released a report that makes clear these projections rest on a dubious assumption: “full implementation” of the president’s economic agenda.
That’s what the 2019 Economic Report of the President says will be necessary to meet the administration’s hopes for economic growth averaging 3 percent a year over the next decade, which is well above growth projections by the Congressional Budget Office, the Federal Reserve and many other analysts.
The chances that the president’s economic agenda will be fully implemented, however, are virtually zero. And in that case, according to the President’s Trump’s report — prepared by his Council of Economic Advisers — economic growth would drop to 2 percent by 2026.
The president’s agenda includes more tax cuts, a long-awaited infrastructure program, substantial changes in government assistance programs, and more deregulatory efforts not only by federal agencies but by state governments around the country.
Administration officials have scoffed at those who say the large, deficit-financed tax cuts that took effect last year merely provided a temporary “sugar high” for an economy that was already doing well. Yet their new economic report essentially argues that more sugar will be needed to maintain the high.
The White House wants to extend the new individual tax cuts, many of which are set to expire in 2026. But the tax legislation has been widely criticized for sharply boosting federal deficits.
Democrats strongly opposed that legislation, campaigned against it last fall, and now control the House. So administration officials can hardly expect Trump’s request for extending that legislation to sail smoothly through Congress without, at least, some alterations that would address Democrats’ concerns about the law’s distributional and budgetary impacts.
That is particularly true when Trump is arguing that the federal government must make deep cuts in many assistance programs and other Democratic domestic priorities.
Kevin Hassett, chairman of the Council of Economic Advisers, acknowledged to reporters last week that renewing the tax legislation would be difficult: “Ask me as an economist, what are the odds that the tax cuts become permanent right now, I’d say 50-50.”
So from the administration’s own perspective, that in itself would seem to make its upbeat projections on economic growth fairly tenuous.
Launching a big infrastructure program will be challenging as well. That sort of investment by the federal government could help support economic growth, and there has long been some bipartisan interest in the idea.
Yet year after year, Washington has failed to move forward on infrastructure, often because of disagreements over funding.
Trump will try to proceed with his deregulatory efforts at the federal level despite Democratic objections. But he also seems to be counting on state governments to decide to cut back in areas such as occupational licensing and regulations for child-care providers. So that produces a number of new asterisks on the administration’s growth projections, including whether such proposals would actually increase growth in the first place.
When the president this month released his proposed budget for Fiscal 2020, The Concord Coalition expressed concern that it did not provide a realistic plan for the coming year and failed to “lay out a credible path to fiscal sustainability.” The administration’s new economic report deepens that concern.