Growth ticked up in 2017 to 2.2 percent, though that rate fell below what the Congressional Budget Office had forecast before Trump’s election. As the president took steps toward deregulation, Republican allies in Congress called tax cuts critical to achieving their 3 percent goal.
The tax cuts passed in December 2017. And when growth surged to 4.2 percent in the second quarter of 2018, the White House declared victory.
“We’re on track to reach the highest annualized growth in 13 years,” the president assured reporters.
“Remember when Obama said you need a magic wand to make that happen?” Donald Trump Jr. told Breitbart. “Well ‘abracadabra,’ Obama. We’re doing it.”
In fact, growth in a single quarter had topped 4.2 percent four different times during the Obama administration. A broad range of analysts had forecast that a deficit-financed tax-cut would stimulate short-term boost beginning in 2018.
Yet even as 3rdquarter growth slowed to 3.4 percent, White House advisers reiterated their confidence. In July, Treasury Secretary Steve Mnuchin called the U.S. “well on the path” for four to five years of sustained 3 percent growth.
In December, top White House economist Kevin Hassett sounded the same note while acknowledging a slowdown in business investment. “We’re definitely going to be at 3 or above 3” for both 2018 and 2019, he told CNBC.
Thursday’s BEA data show otherwise. Growth kept falling in the fourth quarter, to 2.6 percent. The increase in business investment has continued to taper.
Having predicted growth of “substantially over 3 percent,” former National Economic Council director Gary Cohn, has blamed Trump’s trade tariffs for offsetting the boost from the tax cut. But the White House and its allies lacked credible evidence for their growth claim to begin with.
“The 3 percent long-term projection was always a stretch in light of the demographic headwinds,” Harvard’s Greg Mankiw, who chaired the Council of Economic Advisers for President Bush, told CNBC.
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