I can see the blame game already. We would have got growth if Powell had just lowered interest rates sooner. Feels like Trump is prepping that already.
As Tom Petty said about tax cuts for the rich: “Hey baby, there ain’t no easy way out.”
Sure, on the day Trump conjures an insurrection and sends in troops for the cameras, growth projections might seem like a side show. But some of us still have to read the fine print.
Admin officials claim the BUBB (Big Ugly Budget Bill) will spark 3% growth and raise $4T in revenue—enough to cover its massive tax cuts for the rich.
That’s nonsense. No tax bill in history has come close. Even the TCJA didn’t pay for itself. Most of BUBB is just an extension of current policy. The real kicker? The Trump tariffs have tripled—a quiet tax hike that drags growth in the opposite direction.
Goldman Sachs estimates the tariffs will shave a full point off GDP this year—more than wiping out any supposed gains.
To hit their numbers, growth would have to magically jump to 3% and stay there for a decade. That’s fantasy.
So yes, we’ve got bigger fires burning. But we can track more than one. And this one’s burning a hole in the budget.
What is the impact on growth of hollowing out government services, halting public investments in research, dismantling health care, killing animal spirits in financial markets, raiding thousands of workplaces, and detaining millions of workers?
Does anyone not remember the great Kansas experiment under Sam Brownback that, in my humble opinion, thoroughly debunked the “tax cuts lead to growth” fallacy?
Trump has come up with his best distraction yet. Fighting with car burning young Hispanics in the streets of LA. Who's gonna pay attention to the Big Ugly Bill while this is going on?
"if it raises real GDP growth from its current trend of ~2% to 3%"
Jared, I'm looking at real GDP numbers (fred GDPC1) over the two years or so ending with the fourth quarter of 2024 (before the tariff mishegas distorted the data), and I just can't see how we have a current trend of ~2%. No matter which quarter I choose as a starting point, I see a growth rate of between 2.5% and 2.9% from that starting point to 4Q 2024. Examples:
• since 1Q 2022, real GDP growth rate = 2.7%
• since 1Q 2023, real GDP growth rate = 2.9%
• since 1Q 2024, real GDP growth rate = 2.8%
Yet many very smart people say the current GDP growth trend is about 2%. Can you explain, please?
Sure, though I should probably write a post on this question, because you have a point. Most estimates, eg, CBO, of the US economy's underlying growth rate is ~2%. This is the sum of productivity growth, ~1.5%, and labor force growth (really, hours worked), of about 0.5%. You're right about recent growth rates being higher than that, though some of that was unusual post-pandemic era stuff--fiscal and monetary policy juicing the growth rate. I think we've been growing a bit above trend (and I'm concerned that bad policy will soon take us below trend).
But for the post and my critique of what the admin official said, think of it this way: "whatever the current growth rate is, the BUBB will add a point to it." To which I say: nuh-uh.
Continuing thanks for your insight and erudition. With the TCJA, I recall that the expatriation of many years of foreign income by domestic corporations was allowed at a reduced rate. I have never seen final numbers for this amount.
I recall that the mantra of the R's since Bush II has been that tax cuts pay for themselves through increased revenue. Much like "trickle down economics", I don't recall this ever being close to the truth either with Bush 2 or Trump 1 tac cuts. Both ballooned the deficit and debt. However, the remittance of this income at a reduced tax ate, which had accumulated years overseas, once returned stateside, did mark a one-time extraordinary multi-year tax collection.
HOW MUCH OF THE INCREASED TAX COLLECTION WAS ATTRIBUTABLE TO THIS ACTION? T
Thank you, Sir. I’ll continue to follow your work, as I deeply value both experience and insight into the macroeconomic effects of the present administration, or the lack of understanding which it appears to exemplify.
As the British expression goes, “Onward through the fog…”.
An argument I'm seeing is that it may not meaningfully increase growth, but it would cut growth to raise taxes from their present levels by not extending the tax cuts. Any comments on that?
I'll add this good question to our questions to answer during out Let's Do Lunch session today at 12 noon ET at the Contrarian website! Short answer: true.
I can see the blame game already. We would have got growth if Powell had just lowered interest rates sooner. Feels like Trump is prepping that already.
As Tom Petty said about tax cuts for the rich: “Hey baby, there ain’t no easy way out.”
Sure, on the day Trump conjures an insurrection and sends in troops for the cameras, growth projections might seem like a side show. But some of us still have to read the fine print.
Admin officials claim the BUBB (Big Ugly Budget Bill) will spark 3% growth and raise $4T in revenue—enough to cover its massive tax cuts for the rich.
That’s nonsense. No tax bill in history has come close. Even the TCJA didn’t pay for itself. Most of BUBB is just an extension of current policy. The real kicker? The Trump tariffs have tripled—a quiet tax hike that drags growth in the opposite direction.
Goldman Sachs estimates the tariffs will shave a full point off GDP this year—more than wiping out any supposed gains.
To hit their numbers, growth would have to magically jump to 3% and stay there for a decade. That’s fantasy.
So yes, we’ve got bigger fires burning. But we can track more than one. And this one’s burning a hole in the budget.
You may like my stack, Burnt Ground. JosephZeigler.substack.com
“If we get 3% growth” is giving off real “if my grandmother had wheels she’d be a bicycle” vibes.
What is the impact on growth of hollowing out government services, halting public investments in research, dismantling health care, killing animal spirits in financial markets, raiding thousands of workplaces, and detaining millions of workers?
That there's one them those rhetorical questions!
Does anyone not remember the great Kansas experiment under Sam Brownback that, in my humble opinion, thoroughly debunked the “tax cuts lead to growth” fallacy?
Trump has come up with his best distraction yet. Fighting with car burning young Hispanics in the streets of LA. Who's gonna pay attention to the Big Ugly Bill while this is going on?
https://kathleenweber.substack.com/p/trumps-strategy-flood-the-zone-with
"if it raises real GDP growth from its current trend of ~2% to 3%"
Jared, I'm looking at real GDP numbers (fred GDPC1) over the two years or so ending with the fourth quarter of 2024 (before the tariff mishegas distorted the data), and I just can't see how we have a current trend of ~2%. No matter which quarter I choose as a starting point, I see a growth rate of between 2.5% and 2.9% from that starting point to 4Q 2024. Examples:
• since 1Q 2022, real GDP growth rate = 2.7%
• since 1Q 2023, real GDP growth rate = 2.9%
• since 1Q 2024, real GDP growth rate = 2.8%
Yet many very smart people say the current GDP growth trend is about 2%. Can you explain, please?
Sure, though I should probably write a post on this question, because you have a point. Most estimates, eg, CBO, of the US economy's underlying growth rate is ~2%. This is the sum of productivity growth, ~1.5%, and labor force growth (really, hours worked), of about 0.5%. You're right about recent growth rates being higher than that, though some of that was unusual post-pandemic era stuff--fiscal and monetary policy juicing the growth rate. I think we've been growing a bit above trend (and I'm concerned that bad policy will soon take us below trend).
But for the post and my critique of what the admin official said, think of it this way: "whatever the current growth rate is, the BUBB will add a point to it." To which I say: nuh-uh.
Continuing thanks for your insight and erudition. With the TCJA, I recall that the expatriation of many years of foreign income by domestic corporations was allowed at a reduced rate. I have never seen final numbers for this amount.
I recall that the mantra of the R's since Bush II has been that tax cuts pay for themselves through increased revenue. Much like "trickle down economics", I don't recall this ever being close to the truth either with Bush 2 or Trump 1 tac cuts. Both ballooned the deficit and debt. However, the remittance of this income at a reduced tax ate, which had accumulated years overseas, once returned stateside, did mark a one-time extraordinary multi-year tax collection.
HOW MUCH OF THE INCREASED TAX COLLECTION WAS ATTRIBUTABLE TO THIS ACTION? T
Thank you, Sir. I’ll continue to follow your work, as I deeply value both experience and insight into the macroeconomic effects of the present administration, or the lack of understanding which it appears to exemplify.
As the British expression goes, “Onward through the fog…”.
It for us to attempt to minimize it.
Best, Senator Anderson former (Tex. Dust. 1).
An argument I'm seeing is that it may not meaningfully increase growth, but it would cut growth to raise taxes from their present levels by not extending the tax cuts. Any comments on that?
I'll add this good question to our questions to answer during out Let's Do Lunch session today at 12 noon ET at the Contrarian website! Short answer: true.
I look forward to the Lunch session and I'll hope the magnitude of the effects doesn't change opposition to the BUBB.
That's my bad. I should have said, "true, but again, tiny." Will elaborate later.