Must-Read: Simon Johnson: Trump’s Growth Charade by Simon Johnson – Project Syndicate

Must-Read: The smart and honest Simon Johnson likes the Trumpists’ and Cogan, Hubbard, Taylor, and Warsh’s 3%/year real national product fake forecasts even less than I do:

Simon Johnson: Trump’s Growth Charade by Simon Johnson – Project Syndicate: “Officials in President Donald Trump’s administration frequently talk about getting annual economic growth in the United States back above 3%… https://www.project-syndicate.org/commentary/trump-administration-growth-assumption-by-simon-johnson-2017-07

…Their proposed budget actually assumes that they will succeed…. Unfortunately, left to its own devices, the economy will most likely continue to sputter. And the policies that Trump’s Republican Party has proposed–for health care, taxes, and deregulation–will not make much difference. The assumption of higher growth is more of an accounting smokescreen for tax cuts than anything else. If administration officials acknowledge that a 3% annual rate is not feasible, they would need to face the reality that their forecasts for tax revenues are too high, and that their proposed tax cuts, if enacted, would dramatically increase the budget deficit and the national debt.

The US economy used to grow at more than 3% per year; in fact, this was the norm in the second half of the twentieth century. Since then, however, the US has been forced to confront three major constraints…. The US population is aging… has reduced US potential annual growth by perhaps as much as half a percentage point…. Lurking in the background are potential policies that would restrict legal immigration…. The slowing rate of productivity growth…. The 2008 financial crisis…. Deregulation in the 1990s and early 2000s… leading to slightly higher growth for a while–and then to a massive crash…. Relaxing limits on leverage…. Any boom generated in this way is likely to end badly….

Assuming 3% growth is, to put it generously, wishful thinking. Worse, it is deeply misleading–and potentially dangerous…