Trump promised better economic growth than Obama. It did not happen


Growth reached 2.2% in 2017, although this rate fell below the estimates of the Congressional Budget Office before the Trump election. While the president was taking steps toward deregulation, Republican congressional allies have called the tax cuts essential to achieving their goal of 3%.

The tax cuts were passed in December 2017. And when growth reached 4.2% in the second quarter of 2018, the White House declared the victory.

"We are on track to achieve the highest annualized growth in 13 years," said the president.

"Do you remember when Obama said you needed a magic wand to get there?" Donald Trump Jr. told Breitbart. "Well, heck, Obama, we do it."

In fact, growth in a single quarter had exceeded 4.2% four times under the Obama administration. A wide range of analysts had predicted that a tax cut financed by a deficit would stimulate a short-term increase from 2018.

Yet, even as 3rd Quarterly growth slowed to 3.4%, White House advisers reiterated their confidence. In July, Treasury Secretary Steve Mnuchin said the US was "on track" for sustained growth of 3% for four to five years.

In December, the leading White House economist, Kevin Hassett, sounded the same thing, while acknowledging a slowdown in business investment. "We will definitely be 3 or more than 3" for 2018 and 2019, he told CNBC.

Current BEA data show the opposite. Growth continued to fall in the fourth quarter, reaching 2.6%. The increase in business investment has continued to shrink.

Former National Economic Council director Gary Cohn, who predicted growth "substantially above 3%," accused Trump's trade tariffs of offsetting lower taxes. But the White House and its allies had no credible evidence of their claim to growth.

"The long-term projection of 3% was still exaggerated given the demographic challenges," said Greg Mankiw, of Harvard, who chaired President Bush's Council of Economic Advisers.

This does not mean that the White House program will not produce long-term benefits. But Republican economist Doug Holtz-Eakin, a former Bush adviser and director of the CBO, believes that determining its impact will take years.

"The real question is how much the trend has improved: are we slowing to 2.5% instead of 2.0%?" asked Holtz-Eakin. "The test of Trump's administration strategies will be their impact on productivity growth, and the data is not yet available."

Meanwhile, economists at the CBO and the Federal Reserve both lowered their growth forecasts for 2019 to 2.3%. In the long term, both projects have growth of less than 2%.

Clarification: this story has been updated to reflect other measures of GDP growth.

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