Analysis: Trump is playing a high-risk game with the economy

By Heather Long | Washington Post

WASHINGTON – President Donald Trump is beginning his second year in office with a high-risk strategy: Juicing the U.S. economy at a time when it already looks pretty healthy. As his latest budget, released Monday, makes clear, Trump wants growth of 3 percent – or more – a year for the next seven years, a feat that hasn’t happened since Ronald Reagan was president in the 1980s.

Most economists say Trump’s economic dream is virtually impossible. The latest Survey of Professional Forecasters, for example, doesn’t predict growth will hit 3 percent at all in Trump’s first term. The United States is in a different place today than it was three decades ago, many say. The population is much older now, making it more difficult to sustain higher growth, especially without additional immigration or some sort of technological revolution that would make American workers the most productive they have been since the 1960s.

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But Trump doesn’t like being told no. He’s made a career out of defying the odds, and his “Trumponomics” recipe of cutting taxes and hiking spending is meant to spur so much additional business investment that productivity can hit record levels. In theory, that would then boost growth and wages further.

His budget predicts the longest expansion in U.S. history, with moderate inflation and unemployment falling to 3.7 percent in 2019, the lowest level since 1969. Some economists, however, say the more likely result is growth picks up for a year or so and then a downturn hits. By then, the U.S. government would be even deeper in debt with less money to spend to revive the economy.

“This is a joke,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. “I would love if we had 3 percent growth for two years, let alone seven years, but we have an aging population and there is no plausible story I can tell where we’re on a path toward sustained economic growth at that level.”

Friction over these contrasting views of how Trumponomics is likely to play out are causing some of the stock market whiplash. There’s broad agreement that this year looks good. There’s a lot of disagreement about what comes in 2019 and beyond.

“The stock market …read more

Source:: The Mercury News – Nation, World

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