Trump’s Tax Cut Won’t Power The Growth He Predicts, Officials Concede

The Trump administration pushed a $1.5 trillion tax cut through Congress in 2017 on the promise that it would spark sustained economic growth. While the tax cuts have goosed the economy in the short term, officials now concede they will not be enough to deliver the 3 percent annual growth the president promised over the long term.

Trump Tax Cut Won Power

To produce that average growth rate for the next decade, White House forecasters say, the American economy would need additional rollbacks in labor regulations, a $1 trillion infrastructure plan and another round of tax cuts.

Getting all those policies implemented would be highly unlikely, given a divided Congress and a ballooning federal deficit, which could limit lawmakers’ appetite to spend money on a new tax cut or infrastructure plan.

But without those additional steps, the president’s economic team predicts in a report released on Tuesday that growth would slow to about 2 percent a year in 2026. That is the year when many of the individual tax cuts included in the 2017 law are set to expire, essentially producing a tax increase for millions of Americans.

Even if all the new measures were adopted, growth would slow over time, but it would still stand at 2.8 percent at the end of the decade, the White House forecasters say.

Mr. Trump’s Council of Economic Advisers outlined the projections on Tuesday in the annual Economic Report of the President. As is customary for all administrations, Mr. Trump’s advisers built their forecasts around the presumption that all of Mr. Trump’s policy proposals would be enacted in the years to come.

Although the White House forecasts consider those deregulatory efforts and infrastructure spending to be nearly as important to growth as tax cuts, Mr. Trump has made relatively little effort to push states and Congress to enact them.

The reliance on new policies to power additional growth helps explain some of the difference in optimism for future growth between White House forecasters and their counterparts in the Federal Reserve, the Congressional Budget Office and the private sector, who all project significantly slower growth over the next 10 years than Mr. Trump does.

It does not explain why the White House has so much more faith in 3 percent growth this year than other forecasters, who have whittled down their expectations for 2019 in light of increased global obstacles to growth and weaker-than-expected readings of the domestic economy so far this year.

“The idea that we would have a recession next year, it’s certainly not impossible,” Mr. Hassett said. “Recessions very often happen, and few people see them coming. But it would be very unusual for such a thing to happen given the maximum amount of capital spending and new capacity that’s being brought online.”

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