Economic growth will hit 3.3 percent in 2018, then slump: CBO

Economic growth will hit 3.3 percent in 2018, then slump: CBO
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Economic growth in 2018 will surge to 3.3 percent in real terms, but will slump down below 2 percent by 2020, according to updated Congressional Budget Office (CBO) projections released Monday.
 
The Trump administration has set sustained 3-percent economic growth as its benchmark for success, meaning the news will be welcome ahead of the upcoming midterm elections — but less so come 2020.
 
The 3.3-percent growth estimate in the CBO’s Budget and Economic Outlook report is a significant increase over the 2 percent projected in the previous estimate from June, while the average growth through 2027 increased from 1.8 percent to 2 percent. 
 
The major drivers of the increased growth were the GOP tax plan and the bipartisan spending increase enacted in bipartisan caps and spending deals. CBO also attributed the 2018 boost, in part, to better-than-expected economic data from the second half of 2017.
 
But the growth does not come without costs, CBO noted. Borrowing to fund the tax cuts and spending will send deficits soaring past $1 trillion in the coming years and increase the overall debt burden to 96 percent of GDP by 2028.
 
One of the factors that will temper growth as time goes on is an increase in interest rates, which are set to nearly double by the end of 2019, from the current 1.75 percent to 3.4 percent, higher than the level forecast by the federal reserve.