Most mainstream economists think the booming GDP growth recorded in the fourth quarter will ease toward the end of the year, but President Donald Trump’s chief economic adviser Larry Kudlow says those projections are “pure nonsense.”
The current boom is in the “early innings,” Kudlow said Thursday at a cabinet meeting, according to the Associated Press. “The single biggest event, be it political or otherwise, this year is an economic boom that most people thought would be impossible to generate," Kudlow said to President Trump. “Not a rise. Not a blip. People may disagree with me, but I’m saying this, we are just in the early stages.”
Carl Tannenbaum, chief economist of Northern Trust, told the AP that while economists would love to see an extended boom, they just don’t think it’s in the cards. “Economists are incredibly hopeful that the White House is right,” Tannenbaum said. “Unfortunately, most economic analysis and past historical patterns suggest that we’re in the middle of a sugar rush that will wear off.”
That “sugar rush” is the product of the GOP’s $1.5 trillion in tax cuts over a decade and the roughly $300 billion increase in government spending this year, which helped GDP growth hit 4.1 percent in the second quarter. But headwinds including weak productivity growth, the retirement of the baby boomers, declining immigration and a soaring budget deficit threaten to reduce economic growth significantly over the next several years. The Congressional Budget Office said this week that it expects annual GDP growth to fall below 2 percent by 2020.
On top of that, the tax cuts don’t appear to be laying the groundwork for a long-term boom, with little evidence so far of substantial capital investments by firms that would boost productivity – and wages – in the long run. “The tax cuts are really not moving the needle for businesses,” Scott Anderson, chief economist at Bank of the West, told the AP.