There is something special, it seems, about 4% GDP growth.
On Monday, Republican presidential nominee Donald Trump outlined his vision for the economy under a Trump administration. Lots of claims were made.
And in an appearance on “Fox and Friends” Tuesday morning, Trump put a number on the GDP growth trajectory he thinks would be “easily attainable” under his administration: 4%.
“When China goes down to 7% [GDP growth] it’s like a national catastrophe,” Trump said.
“We’re at 1% [GDP growth] and maybe going lower, believe it or not. Right now we’re at 1%. I think 4% is easily attainable.”
Now, no one denies that 4% GDP growth would be great. Economic growth is the kind of thing anyone can get excited about. The only problem is that no president can simply conjure up a GDP growth target and hit it.
Two of Trump’s former Republican rivals have made similar claims. Last year, Jeb Bush pledged an economy that would grow 4% a year. Earlier this year, Ted Cruz said the US would have a “minimum” GDP growth rate of 5% under his administration.
Since World War II, the US economy has averaged GDP growth around 3%. Since the financial crisis, real GDP growth has been about 2%. The last three quarters of GDP data have shown the economic expanding closer to 1%.
The problem with Trump’s pledge, as was the case with both Bush’s and Cruz’s promises, is that economic growth as calculated by GDP involves many factors well outside the purview of any one president’s policies.
Right now, the global economy is sluggish. Last month, the International Monetary Fund cut its outlook for global growth to 3.1% from 3.2%. Earlier this year, the IMF’s target had been as high as 3.4%.
The US, as the world’s largest economy — and an economy that is also open, meaning goods and services freely flow between the US and other economies — is unlikely to grow much above the prevailing global trend unless things turn around not just in the US but also in big chunks of Europe and Asia.
Trump cites the “national catastrophe” that is China’s 7% economic growth, and he even overshoots the reality in the world’s second-largest economy. In the first two quarters of this year China has grown at a 6.7% rate, the slowest in a generation.
This slowing in China, not to mention stagnant economies in the euro zone and Japan, all adds up to a recipe for disappointing US economic growth, even if the labour market looks pretty good.
The cornerstones of Trump’s economic plan revealed Monday appear to be a tweak in his tax proposals as well as a new child-care deduction, as outlined by Business Insider senior editor Josh Barro.
The child-care proposal, Josh writes, is reminiscent of Trump’s business career: a big promise that may or may not be delivered.
Just like GDP.