Monday 1 May 2017

Wonkbook: Trump really needs an economic boom. What he got was a reality check.

By Ana Swanson and Max Ehrenfreund President Trump came int... | Sponsored by Morgan Stanley
 
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Treasury Secretary Steven Mnuchin, right, joined by National Economic Director Gary Cohn, and White House press secretary Sean Spicer, speak at the White House in Washington on April 26. (Photo by Jabin Botsford/The Washington Post)

By Ana Swanson and Max Ehrenfreund

President Trump came into office promising to make the economy grow at rates the United States hasn't seen for decades. On Friday, as the government reported that the U.S. economy expanded in the first quarter at its slowest pace in three years, he got a glimpse of just how far he has to go.

In the first official growth estimates of Trump's presidency, federal economists reported gross domestic product, a broad measure of economic growth, grew at an annualized rate of just 0.7 percent in the year's first quarter, down from 2.1 percent growth in the fourth quarter of 2016.

The report underscored the challenge the White House faces in reaching its target of 3 percent growth, an expansion Trump not only promised on the campaign but is counting on to fuel his broader economic agenda. The administration is proposing steep tax cuts, and top Trump officials argue those policies will deliver enough economic growth to essentially pay for themselves, with new activity allowing the government to collect the same amount in taxes despite the reduced rates.

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But if that growth fails to materialize, the tax cuts would lead to a massive and potentially destabilizing increase in the national debt as the federal government borrows to make up the gap between elevated spending and falling revenue.

"Tax cuts are a good idea — they help growth — but only if they're paid for," said Mark Zandi, chief economist at Moody's Analytics.

Read the rest on Wonkblog.


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