Is It Realistic? Trump Budget Relies On 3 Percent Economic Growth
STEVE INSKEEP, HOST:
Here is how President Trump proposes to cut taxes. It's not easy to do because cutting taxes reduces government revenue, which might force cuts in spending programs that people like. But if the economy were to grow really, really quickly, people would make more money and pay more taxes even at lower tax rates. Problem solved - in theory.
So the White House has been promising economic growth in the coming years of 3 percent per year, year after year. That doesn't sound like a big deal, but that much sustained growth would amount to an economic miracle. Robert Smith of NPR's Planet Money podcast asked what it would take.
ROBERT SMITH, BYLINE: When we talk about economic growth, we are talking about GDP, gross domestic product. It's a number that adds up all the stuff we make and sell in a single year, GDP. And there have been plenty of times in U.S. history when we have managed to grow that number by 3 percent a year. It hasn't happened recently. But, hey, you never know.
MARC GOLDWEIN: Three percent growth is possible if absolutely everything goes right at the same time. And that means everything going right in terms of policy, and it means everything going right in terms of luck.
SMITH: Marc Goldwein is going to help us do the math. He's the policy director of the Committee for a Responsible Federal Budget, a nonpartisan group. And Marc says the big problem with hitting 3 percent growth is the baby boomers. They're retiring. And when your workforce isn't growing, it's very hard to increase the number of goods and services you make every year. So to get us to 3 percent growth sustained over the next 10 years, Marc says you have to find enough workers to make up for all those baby boomers. There are plenty of people out of work right now. but...
GOLDWEIN: If you took the unemployment rate down to zero, you'd not even be close to 3 percent growth.
SMITH: It is going to take something else. It's going to take immigration. But the level of immigration necessary to hit the goal is staggering.
GOLDWEIN: For us to get 3 percent growth, we would basically need to double our immigrant population over the next decade. So in other...
SMITH: Wait, double the existing immigrant population right now?
GOLDWEIN: Double the existing immigrants. So in other words, immigrants today - that are here today - some of them have been here for as much as, let's say, 80 years. Right? So we need to take the last 80 years of immigration and do it again in the next 10 years.
SMITH: Forty million new immigrants over the decade - not the most politically feasible plan. But there are a few other ways to increase the workforce. We can all work an extra 10 years before we retire. That would do it. Or alternatively, we could all work longer each week.
GOLDWEIN: If we made the weekend a single day instead of two days, that might get us to 3 percent growth.
SMITH: Six work days a week, I know. All this seems absurd. But it is a sign of how hard it is for a country to sustain steady high growth for a decade. It takes something extraordinary. The U.S. did it during the 1960s, but that's when the baby boomers entered the workforce. We had another great growth spurt during the 1990s.
GOLDWEIN: So you remember in the 1990s we had the tech revolution? I mean, so much new software, so much new IT, fiber optics laid out in every street in America.
SMITH: Republicans argue that we can do this again if businesses are given an incentive to grow through tax cuts and fewer regulations, incentives to build more factories, expand stores and office space. Marc says that can help boost growth temporarily, but you would need a lot of it. Remember all the computers that businesses bought during the '90s tech boom? We'd have to do better than that to get to sustained 3 percent growth.
GOLDWEIN: So we would need two dot-com booms going simultaneously at the same time. Now, maybe we can get that with self-driving cars or something else, but I'm not seeing where that is right now.
SMITH: Most economists predict that the true growth over the next decade will be a little less than two percent. But of course, it is so easy to just say 3 percent. It seems so small, so achievable. But over the next few months, you are likely to hear more of the economic dream than the economic reality. Robert Smith, NPR News, New York.
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