Trump's growth projections leave economists in disbelief

Trump's growth projections leave economists in disbelief
© Getty

Economists are dubious of Donald TrumpDonald TrumpKushner says he did not collude with Russia, had no improper contacts Kushner: Meeting with congressional investigators went 'very well' The Hill's 12:30 Report MORE’s claim that he could more than triple economic growth if elected president.

Trump has repeatedly blasted the gross domestic product (GDP) numbers under President Obama as pathetically low, promising he would change the trajectory by building a “tremendous economic machine.” He reiterated those claims during the third presidential debate Wednesday, after the government reported the economy grew 1.4 percent in the second quarter of the year.

ADVERTISEMENT
“We’re bringing GDP from, really, 1 percent ... and if she got in, it will be less than zero,” he said. “But we’re bringing it from 1 percent up to 4 percent. And I actually think we can go higher than 4 percent. I think you can go to 5 percent or 6 percent,” the Republican nominee said.

Such claims are not mere rhetoric from Trump, as many of his economic proposals, including his broad tax cuts, depend on robust growth to cover the costs. Without it, his plans would add trillions of dollars to the deficit and likely damage the economy.

Trump’s bold claims are eliciting scoffs from economists, who argue that such numbers are difficult if not outright impossible to meet.

“His growth expectations are not realistic. The economy's potential growth is 2 percent, and to get stronger growth will require immigration reform that provides a path to legalization for the undocumented and a significant increase in skilled legal immigration. He is strongly opposed to this,” said Mark Zandi, chief economist at Moody’s Analytics.

“Even then, [immigration reform] will increase potential growth to closer to 2.5 percent. We may be surprised and get stronger growth, but it wouldn't be prudent to count on it.”

Conservative economists are equally skeptical.

Stan Veuger, resident scholar at the right-leaning American Enterprise Institute, said Trump is setting a “ridiculous expectation” for growth.

“He doesn’t really know what he’s talking about, and his policy platform is so incoherent that he has to make claims like that,” Veuger said.

The Trump campaign has made the case that slashing regulations, opening up the nation’s energy production and renegotiating trade deals could lead to an explosion of economic activity.

In September, the Trump campaign released a paper explaining how it would cover the lost revenue that comes with Trump’s proposed tax cuts, authored by Peter Navarro, a business professor at the University of California-Irvine, and Wilbur Ross, a private equity investor. In it, they argued that expectations of continued slow economic growth were “unnecessarily defeatist.”

“There is nothing inevitable about poorly negotiated trade deals, over-regulation, and an excessive tax burden — this is a politician-made malaise,” they wrote. “Therefore, nothing about the ‘new normal’ is permanent.”

The campaign argued that renegotiating trade deals to shrink the trade deficit and enacting tax policies that encourage companies to keep their business operations in the U.S. could add significantly to the nation’s economy.

Experts find those arguments unpersuasive.

Some economists, like Zandi, argue that Trump’s preferred policies, which includes huge tax cuts, a crackdown on immigration and deportation of millions of workers in the U.S. illegally, would significantly add to the deficit and actually shrink the economy.

Zandi was the lead author of a June study from Moody’s Analytics that claimed that Trump’s policies would cost the country 3.5 million jobs and drive the nation into a lengthy recession. Trump’s opponent, Democratic nominee Hillary ClintonHillary Rodham ClintonWhite House: Trump ‘very disappointed’ by Sessions recusal Democrats roll out 'Better Deal,' new economic agenda Howard Dean: Trump 'needs psychiatric help' MORE, has cited that study on the campaign trail.

The Trump campaign claims that Zandi is extremely biased.

Navarro on Sunday night said it is "journalistically irresponsible to portray Zandi as anything other than a Democratic shill for, and major donor to, Hillary Clinton. He has been unmasked by CNBC and exposed by factchecker.org for conduct unbecoming of an objective source. The U.S. grew at 3.5 percent from 1947 to 2001, and we can easily hit that goal or higher by cutting taxes, reducing regulation and eliminating our trade deficit. End of story."

Some economists argue the U.S. is simply not poised for explosion of growth due to the fundamentals of the economy.

“The idea that he has an obvious lever to get us to anywhere close to that, I don’t see it,” said Josh Bivens, research and policy director for the left-leaning Economic Policy Institute. “It’s not economically literate.”

The Federal Reserve does not project the economy to grow above 2 percent through 2019, and its longer run expectations are for the economy to grow about 1.8 percent per year. That’s in large part because the U.S. as a whole is not trending in a direction that suggests a dramatic change is coming anytime soon.

There are two main ways to boost economic growth: by expanding the size of the workforce or by finding ways to make those workers more productive. With the Baby Boomer generation beginning to retire, the nation’s workforce is growing at a slower rate. Obvious ways to boost the size of the workforce, like encouraging immigration into the country, run directly counter to some of Trump’s policy goals.

And with the country already at the vanguard of technology, no one can predict when some innovation could come along to dramatically boost productivity.

“We can’t just copy other people’s methods,” Bivens said.

When making his case, Trump has frequently compared the country's economic performance to places like China and India.

“I just left some high representatives of India. They’re growing at 8 percent. China is growing at 7 percent. And that for them is a catastrophically low number,” Trump said in Wednesday’s debate.

But the economies of India and China are significantly different than the United States. Both are emerging economies and have ample room for improvement as they train up their workforce and take advantage of productivity developments from across the world.

“They have a lot of reasons why they can hit very fast productivity growth rates,” Bivens said. “The fact that they’re growing fast is totally a function of the fact that they’re starting at a much lower level.”

But not all economists are convinced the U.S. does not have a path to more substantial gains. Lindsey Piegza, chief economist at Stifel Nicolaus, argued that if policymakers could work together to encourage business activity, getting close to Trump’s projected range isn’t impossible.

“If we can get monetary policy and fiscal policy in line ... I think absolutely we could talk about adding an additional 2 percent,” she said. “I think 4 percent is realistic.” 


This article was updated at 7:50 pm.