Commerce Secretary Throws Bucket of Cold Water on Economic Growth Projections
US Commerce Secretary Wilbur Ross poured a bucket of cold water on promises of robust economic growth in the first year of the Trump administration.
Trump set a goal of 3% GDP growth for 2017, but Ross said “it’s certainly not achievable this year, ” during an interview with Reuters. The commerce secretary blamed slow implementation of Trump’s economic agenda for putting a damper on growth projections.
The Congress has been slow-walking everything. We don’t even have half the people in place.”
Many analysts believed Trump’s economic program of tax cuts, healthcare reform, reducing regulation, and America-first trade policies would spark economic growth. The stock market responded with a post-election boom some have dubbed “the Trump effect.” But things haven’t progressed quite as planned. More than 100 days in, and the administration hasn’t had much success putting its policies in place. Nevertheless, Ross insisted the administration could spark growth in the year after all of Trump’s business-friendly policies are implemented.
But will that even happen? Trump has found getting things done on Capitol Hill isn’t as simple as it was in the boardroom of Trump Tower.
The administration’s first major push to repeal and replace Obamacare turned into a complete debacle. Initially, Congress couldn’t even pass a modest reform of the Affordable Care Act, much less repeal it. Last week, the House finally approved a measure that falls far short of repeal, and even that faces high hurdles in the Senate. Trump did announce a tax plan that looked pretty good on the surface, but was woefully short on specifics. It also faces an uphill battle in Congress. And while Trump supporters salivate at the thought of more restrictive trade policies, the prospect makes a lot of people nervous, including America’s trade partners. As Reuters put it, they have been “spooked” by Trump’s vow to renegotiate or even pull out of trade deals.
Trump’s surprise sacking of FBI director James Comey yesterday is indicative of his seemingly knee-jerk approach. There may be a method to his madness, as some claim, but nobody can actually explain what it is. The immediate effect of such actions is to raise political tensions inside the Beltway. Investing.com reported gold gained in Asia on the news, due to fear that “the resulting political blowback could further derail efforts at tax cuts and other economic policy aims.”
In general, Trump has showed a penchant creating uncertainty and confusion. Within one week in April, Trump spun complete 180s on policies that were central to his campaign. This kind of regime uncertainty does not make for an environment that fosters economic growth.
Nevertheless, the Atlanta Fed came out with a growth estimate for Q2 at over 4%, this despite dismal first quarter growth of just 0.7% and preliminary economic data already below estimates in the first weeks of Q2. (Keep in mind, these same people also initially forecasts strong growth in Q1.) Peter Schiff called the Atlanta Fed’s prediction “crazy” during a recent podcast.
They actually are starting out with a much higher estimate for Q2 than they had in Q1 despite having all of this information about how weak the economy was in Q1 that they didn’t have a few months ago. How is this possible?”
There seems to be a pretty predictable pattern when it comes to economic growth forecasts. Analysts and government officials promise the moon and deliver a few moon rocks. They start out telling us everything is going to be great, and then gradually walk it back until we’ve got not-so-great. The Fed is doing it. The Trump administration is doing it. The best bet is to look at the actual data. At this point, it is not screaming robust growth.
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