The White House Council of Economic Advisers (CEA) on Wednesday said it projects the U.S. economy to grow by at least 3 percent of gross domestic product (GDP) through 2020.
The CEA’s 2018 economic outlook, released Wednesday, argues that measures taken by President Trump to slash corporate taxes and cut back regulations have salvaged an economy they say was throttled by his predecessor’s policies.
CEA’s forecast is in line with Trump’s goal of consistent 3-percent yearly growth, but exceeds the Federal Reserve Board’s projection of 2.5 percent growth in 2018 and projection for that growth to trend down to 2 percent by 2020.
The White House team cited better-than-expected growth in 2017, dozens of companies pledging to boost wages and hiring with tax-cut savings and rising economic confidence to back its projection.
CEA Chairman Kevin Hassett said Wednesday that the White House forecast represents a new standard for the U.S. economy thanks to the Trump administration’s policy agenda. He said tax reform and a deregulation effort are undoing the damage inflicted by the Obama administration.
“That normal is happening because we’ve restored economic policies to where a sensible, rational country would put them,” Hassett said during a call with reporters. He said the Obama administration’s policies “tempered the success of the very middle-class households they were intended to help.”
The CEA report argues that the Obama administration hindered the recovery from the 2008 recession by maintaining a 35 percent corporate income tax rate and passing expansive regulations such as the Affordable Care Act.
“We inherited an economy that had some really serious problems,” Hassett said. “Honestly I think we’d have been lucky to get 1.5 percent growth” remaining under Obama-era policies.
The Trump administration and its congressional allies have insisted that January’s $1.5 trillion tax cut would unleash economic growth and pay for itself, but a number of economists have panned those claims as overly optimistic and have warned of the tax cut’s impact on federal deficits.
CEA said the reduction in the corporate tax rate to 21 percent would lead to an average of $4,000 in additional annual income per household. It argued that the tax cut would reduce the costs of capital for businesses, leading to investments in labor productivity and wage increases.
Hassett cited the than 100 businesses pledging to invest their tax savings in capital expenditures, higher wages for workers, hiring employees and expanding U.S. operations.
“In the long run, we’re going to be glad we fixed those things,” Hasset said.
Budget hawks fumed and credit analysts raised concerns after Trump signed a two-year budget deal earlier this month that increased federal spending caps by $300 billion over ten years. The White House budget released soon after did not balance within ten years or eliminate federal deficits, two tenants of GOP fiscal policy during the Obama administration.
Economists have long warned that the ballooning U.S. debt, now at $20 trillion, could spike borrowing costs, crowd out economic growth and even threaten the country’s national security.
Hassett ceded that the White House faces serious challenges ahead posed by the debt, but insisted Trump’s economic agenda has already steered the U.S. toward solvency.
“We inherited an economy that was widely expected to be in the 1 percent range,” Hassett said. “‘The growth that we expect to see will give us the resources that will help us address the deficit problem.”
The administration also noted that global trade can help grow the U.S. economy, but “it must be pursued with American interests in mind.”
“We cannot continue to pursue a global order that disregards America’s prosperity and the well-being of our citizens,” the report says.
The Trump administration is working on updates to the North American Free Trade Agreement (NAFTA) with Mexico and Canada, as well as amendments to a U.S.-South Korean trade pact that went into effect in 2012.
Trump is also considering higher tariffs and strict quotas on steel and aluminum imports the Commerce Department argues are putting national security at risk.
The White House report says that in the coming year it will “seek to negotiate new, better trade deals” and will hold countries accountable for any unfair trade practices “through tough and focused action.”
The CEA report was less optimistic about other factors threatening economic growth. Hassett said the U.S. economy loses roughly $100 billion per year due to cyber attacks, with the potential costs and risks growing.
Hassett also said that “there’s a market failure that leaves private firms … to invest less in cybersecurity than what would be economically optimal.”
The CEA also noted the nationwide opioid epidemic, saying widespread opioid addiction is suppressing labor productivity and labor participation.
Vicki Needham contributed