WASHINGTON -- President Donald Trump's top economists say the U.S. economy is growing faster than expected, but will not grow at the 3% annual rate that Trump promised to voters unless Congress enacts a major infrastructure package and additional tax cuts.
The annual economic report of the president released Thursday said the economy added more jobs, experienced a lower unemployment rate and grew faster than the projections in an August 2016 report by the Congressional Budget Office.
"The overall evidence of the report as we see it is that three years into the Trump administration the U.S. economy continues to outperform pre-2016 election expectations," said Tomas Philipson, acting chairman of the White House Council of Economic Advisers.
But economists predicted that if the president and Congress do not make further policy changes, the economy will grow at a 2.4% annual pace this year and at a 2.3% pace in 2021. That kind of growth is well below what Trump promised and similar to what occurred under President Barack Obama.
Job gains and the unemployment rate have been following similar paths since Trump succeeded Obama -- and the former president tweeted out Monday that the roughly $800 billion stimulus package he signed into law 11 years ago had "paved the way for more than a decade of economic growth and the longest streak of job creation in American history."
The economy under Trump saw a bump in growth in 2018 after the tax cuts that were signed into law during his first year in office. Trump pledged at the time that the roughly $1.5 trillion in tax cuts over 10 years could propel growth upwards of 3%, if not "4, 5, and maybe even 6%." In fact, growth topped out at 2.9% in 2018, matching the 2015 rate before Trump became president.
The economy grew 2.3% last year and 2.4% in 2017, according to the Commerce Department. Trump's large tax cut and his increase in federal spending lifted growth in 2018, but it has since moderated, especially after he escalated his trade wars. Business leaders were spooked by Trump's tariffs on goods from China and other nations and pulled back sharply on investments in factories and equipment, creating a drag on growth.
To achieve faster growth, the White House economists said there would need to be more deregulation, an immigration overhaul, passage of an infrastructure plan, more trade deals, incentives to get more Americans working and permanent tax cuts for American households (the corporate tax cuts that Republicans passed at the end of 2017 are permanent, but the individual tax cuts are set to expire after 2025). Most of these policy changes require Congress' help, an unlikely scenario as long as Democrats control at least one chamber.
Acting White House Chief of Staff Mick Mulvaney told a crowd at a private gathering in England on Wednesday night that the Trump administration "needs more immigrants" for the U.S. economy to continue growing, according to an audio recording of his remarks obtained by The Washington Post.
"We are desperate -- desperate -- for more people," Mulvaney said. "We are running out of people to fuel the economic growth that we've had in our nation over the last four years. We need more immigrants."
The Trump administration wants those immigrants to come in a "legal fashion," Mulvaney said, according to the recording.
Mulvaney's remarks appear in contrast to the public position of several top figures in Trump's White House -- especially that of senior policy adviser Stephen Miller -- who have been working to slash both legal and illegal immigration via a slew of policies that aim to close off the U.S. border to foreigners. They have insisted that the steady arrival of newcomers depresses wages for the blue-collar U.S. workers whose votes helped lift Trump to the presidency in 2016.
Meanwhile, economic growth at around 2% is likely to be enough to keep the economy healthy and keep businesses steadily adding jobs every month. Goldman Sachs predicts that the unemployment rate will fall this year to 3.25%, a level not seen in more than 65 years. The vast majority of Americans say this is the best economy since the late 1990s. Independent voters and less-affluent voters are increasingly likely to give the economy high marks, which should help Trump as he seeks reelection.
The White House also claims to have reduced economic inequality, as the poorest 50% of Americans now hold 1.6% of the nation's wealth. That figure from the Federal Reserve is up from the end of Obama's presidency. But it largely reflects gains in home prices and housing equity, which had been slumping through 2011 as a result of the foreclosure crisis and recession.
The richest 1% of Americans hold 32.2% of the nation's wealth, slightly more than what they held before Trump became president.
Trump and top White House officials argued that the faster growth seen in 2018 would last, but many independent forecasters characterized it as a temporary "sugar high" from all the stimulus measures. The White House also predicted a boom in business investment after the tax cuts, but that has not materialized. Business investment outside of home building shrank for much of last year.
"Initially, we saw a huge surge in investment. Once we got a renegotiation of trade agreements, we saw uncertainty in the market, and investment took a hit," Philipson said.
Philipson predicted a jump in business investment this year, but that is likely to hinge on trade policy and better global growth. Last year brought the slowest global growth since the recession, another factor making business leaders nervous. Many big banks foresee a rebound this year, but the coronavirus is causing a substantial drag on the Chinese economy that is spilling over to nations including Japan, South Korea and Singapore.
This latest White House economic forecast does not take into account the impact of the coronavirus. Philipson and Trump adviser Larry Kudlow continue to think the U.S. economy will experience only a modest impact -- about 0.2% -- from the coronavirus in the first quarter.
Information for this article was contributed by Heather Long, Nick Miroff and Josh Dawsey of The Washington Post and by Josh Boak of The Associated Press.
A Section on 02/21/2020