President Trump told a crowd at an Illinois steel plant on Thursday that if quarterly growth “has a 4 in front of it, we’re happy.”
On Friday, the Commerce Department reported that indeed the economy had grown 4.1 percent in the second quarter of this year – the best quarter in four years.
“Historic unemployment, a steady rise in wages, and a variety of tax breaks likely boosted spending by businesses and consumers during the April through June period,” NBC News reported.
But the network cautioned that “Friday’s figures all but solidify the likelihood that the Federal Reserve will continue its plan of gradually raising its benchmark interest rate for the remainder of 2018 and into 2019.”
ABC News suggested we should enjoy our growth, fueled by “consumers who began spending their tax cuts and exporters who rushed to get their products delivered ahead of retaliatory tariffs,” now because it is unlikely to last.
“President Donald Trump is predicting growth will accelerate under his economic policies,” ABC News wrote. “But private forecasters cautioned that the April-June pace is unsustainable because it stems from temporary factors. The rest of the year is likely to see good, but slower growth of around 3 percent.”
Larry Kudlow, director of the National Economic Council, said at a press event Friday that the growth is sustainable because it is built on an explosion in energy exploration and mining and a 9 percent boost in business investment. “This is no one-shot effort,” he said.
ABC also embedded a video of a segment last December in which George Stephanopoulos interviewed liberal economist Paul Krugman and conservative economist Glenn Hubbard. It started with a clip of Russian President Vladimir Putin saying, “Look at the markets, how they’ve grown. This attests to the trust investors show in the American economy. They have trust in what President Trump is doing in this particular field.”
After which Stephanopoulos snarked, “An endorsement of President Trump’s economy from President Vladimir Putin of Russia.”
During the interview, Krugman told Stephanopoulos, “Basically all serious studies say … eh, not so much,” when asked whether Trump’s tax package would generate economic growth.
Krugman went on to say the dollar was weaker than when Trump took office because businesses were not repatriating dollars as he predicted. “What the markets are saying is this is a big nothing burger,” Krugman said. “The markets are saying they don’t really expect any significant economic boost from this … certainly not enough to actually move the important asset values, so it doesn’t look like much of anything.”
It’s impossible now to say they don’t look like much of anything. In NPR’s story, Ian Shepherdson, chief economist of Pantheon Macroeconomics, admits the tax cuts are boosting the economy, “but [he] says that just creates ‘a short-term sugar rush to growth and then probably some sort of hangover eventually down the line.”
It would have been better if the government had passed a “big infrastructure plan” because that would have “meant long-term projects that would have helped boost growth and underlying productivity for years to come.”
“Trump cheers ‘amazing’ economic growth as economists caution it could be a blip,” read the headline on the Washington Post website.
“Economists caution the robust growth was a result of one-time factors and is likely to be short-lived,” the Post wrote.
“Most independent economists see this quarter as a blip,” it wrote later.
“The vast majority of economist warn that Trump’s trade war will hurt U.S. growth,” it wrote even later. But it “temporarily boosted growth in the spring as foreign firms rushed to make purchases before the tariffs took effect.”
Soybean exports “exploded in the second quarter,” the Post reported. The Federal Reserve predicts annual growth of 2.8 percent, and Trump’s prediction of 3 percent growth for years to come is seen by “most mainstream economists” as “overly optimistic.”
And that’s “’still short of what the Trump administration promised,’” it quoted Paul Ashworth of Capital Economics as saying.