Is Trump’s Goal Of 3% Growth Realistic? You Bet It Is
7/21/2017
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Growth: It’s a given among pundits and mainstream economists that President Trump’s budget forecast of 3% GDP growth is a nonstarter, an outlandishly grandiose estimate of how fast the economy can grow, an impossibility. While the critics make good arguments, they’re wrong.
Recent headlines tell the story:
“The Economic Growth Forecasts The Administration Relied On Are Totally Unrealistic,” U.S. News & World Report opined.
“Trump 3% GDP Growth Plan Makes No Sense,” the Business Insider sneered.
“Trump’s Growth Forecasts Are the Budgetary Equivalent Of Putting Your Fingers In Your Ears And Yelling, ‘Na Na Na Na Na,’ “ was Salon’s subtle offering.
In their defense, their reasoning isn’t entirely wrong. It all boils down to this: In classical growth accounting, long-term GDP growth basically equals growth in the workforce (or hours worked) plus growth in productivity. Since the workforce is now growing at about half a percent or so a year and productivity is barely above 1%, that yields a sub-2% growth rate. Therefore, President Trump must be insane.
Trump certainly can’t be serious about tax cuts. The “nonpartisan “ CBO says this will cause a dollar for dollar increase in the deficit. What bunk, the CBO is worse than useless.
They don’t understand that productivity can jump by ten percent simply because people feel a little more positive about life and actually take some slight interest in their job. On most jobs the best people are at least three times as productive as the worst. I have seen plenty who don’t turn out an honest ONE HOUR of work in a day. I have also seen VERY productive people become so discouraged by management failure that they become clock watchers who just want to get by until time to hit the door and go home.