Donald Trump’s formula for making America great again economically is pretty simple – cut regulations, lower personal and corporate taxes, and spend money on aging but necessary infrastructure like roads, bridges, and the power grid.
If those policies are implemented, what will that do to U.S. GDP?
According to CNBC, a Deutshe Bank forecast says these policies could very well begin a “new age in U.S. economic growth that could serve as a global template.”
In fact, the forecast says that gross domestic product growth is projected to not just increase, but to double its current level of growth, from the 1.6 percent average under the Obama administration to 2.4 percent in 2017 and 3.6 percent in 2018.
Trump's plans could double US GDP growth by 2018, Deutsche Bank says https://t.co/tRnogoPPFi
— CNBC (@CNBC) January 9, 2017
“This policy mix has the potential of reigniting productivity growth and raising U.S. growth potential,” David Folkerts-Landau, chief economist at Deutsche Bank, said in a report for clients. “While Trump introduces higher uncertainty, this is better than the near certainty of the continuation of a mediocre status quo.”
The impact may not be felt immediately, but once the new agenda kicks in it will serve as a “game changer for the U.S. economy,” Folkerts-Landau added.
As far as recoveries go, President Obama’s measly 1.6 percent has been the worst since the Great Depression, according to CNBC. In fact, Obama happens to be the first president since Hoover to not reach 3 percent growth for any year of his administration.
Deutsche then says the projected U.S. growth will push global GDP from 3 to 3.4 percent in 2017.
As opposed to Obama’s reliance on questionable monetary policies like zero interest rates and excessive money-printing which will eventually lead to inflation, Trump’s policies will focus on more “broad-based growth that will stretch from Wall Street to Main Street.”
“This policy will be successful in moving the U.S. economy away from low-growth secular stagnation towards significantly more buoyant performance,” Folkerts-Landau said. “We would not be taken by surprise by a doubling of the growth rate of real GDP in the U.S. over the next two years, nor by a further significant move up of equity valuations and a material further appreciation of the dollar.”
He also notes that the approach is close to one Deutsche has advocated for Europe “for a number of years now.”
“This approach should produce a new order that will ultimately be more stable in the sense that ‘good fences make good neighbors,'” Folkers-Landau said. “However, we do note that the uncertainty about the Trump administration’s policies is still large, as is the reaction of those impacted by these policies.”
Though there are certainly risks, such as trade wars, Chinese instability, and interest rates rising too quickly, a pro-growth strategy that works also has the added benefit of producing more tax gains over the long haul, and quite possibly giving the United States a shot at paying down that yuge national debt.
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