You tell us GDP growth has been projected to be 1.8 percent and that any assumption that Trump's fiscal plan will increase it to 2.8 percent is folly. Yet real GDP growth over the last 24 months has been 2.8 percent. Can you explain why it is unrealistic to expect real GDP growth to continue at this pace?
First, I'm getting 2.45% avg real GDP growth over the past 24 months, but your point still stands. CBO--the non-partisan scorekeeper--thinks the long-run growth rate is ~1.8%, so that's where that comes from.
But you're right--we've been beating that trend for awhile. I personally would credit that to Biden's CEA...JK!!
Here's the key point though: the Rs are claiming, incorrectly in my strongly held view, that their plan will raise trend growth--wherever it is right now--by a percentage point. That extra growth point scores as generating more revenue which makes their tax cuts look less expensive on net.
So in this sense, the level of the actual growth rate doesn't matter so much. What matters (to the budget score) is the assumption about how much higher growth will be due to their policy.
You tell us GDP growth has been projected to be 1.8 percent and that any assumption that Trump's fiscal plan will increase it to 2.8 percent is folly. Yet real GDP growth over the last 24 months has been 2.8 percent. Can you explain why it is unrealistic to expect real GDP growth to continue at this pace?
Excellent question!
First, I'm getting 2.45% avg real GDP growth over the past 24 months, but your point still stands. CBO--the non-partisan scorekeeper--thinks the long-run growth rate is ~1.8%, so that's where that comes from.
But you're right--we've been beating that trend for awhile. I personally would credit that to Biden's CEA...JK!!
Here's the key point though: the Rs are claiming, incorrectly in my strongly held view, that their plan will raise trend growth--wherever it is right now--by a percentage point. That extra growth point scores as generating more revenue which makes their tax cuts look less expensive on net.
So in this sense, the level of the actual growth rate doesn't matter so much. What matters (to the budget score) is the assumption about how much higher growth will be due to their policy.
Correction: you said 24 months and I calculated 24 quarters. My mistake!
So the expiry of the tax cuts were included in the projection of the tax revenue. Was it not included in the growth forecast?
https://substack.com/@unmaskingproject2025/p-157063402
All over them like white on rice.