Tuesday, May 23, 2017

Trump's Budget Growth Assumptions

All budgets make assumptions about anticipated growth and the Trump budget proposal is no different. They're assuming a 3%-4% growth rate long term.

Most economists think that's unrealistic.

Trump budget director Mick Mulvaney, rather than DEFENDING their assumptions. attacked the growth assumptions the Obama administration made in sort of a macabre tu quoque pastiche.

The Obama administration assumptions were in line with so-called economic wisdom at the time and after a short 3%-4% recovery phase estimated a long term growth in the 2%-2.4% range.

These numbers also lined up with the CBO estimates because historically the US economy has rebounded for a short period at about double the depression rate before settling into a more modest long term growth.

To put it bluntly, they were wrong. Growth was only about 2% average coming out of the recession. Why? Because economics is one part mathematics, one part black magic and one part confidence and the nation never really recovered its confidence in the economy because the "recovery" was so uneven. Some areas recovered quickly and other areas can justifiable ask "what recovery?"

Now the Trump administration is assuming 3%-4% SUSTAINED growth, which is much more optimistic than anything the Obama administration ever assumed, without providing any justification beyond we're going to cut taxes and then a miracle will happen.

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