President Trump’s economic goals for his administration can be summed up in one number: three. That’s the percentage of economic growth they are working toward, and, if achieves, it’s a number with the power to dramatically improve the fortunes of nearly every American.
Historically, 3 percent growth is a relatively modest goal. Between the 1940s and 2007 the economy grew at an average rate of roughly 3.5 percent. More recently, during the economic recovery following the recession of 1981-1982, there were five quarters of 7 percent or higher growth, and five years averaged 4.6 percent growth.
By contrast, we’ve now suffered through a record 10 straight years without 3 percent growth in real Gross Domestic Product. In fact, we haven’t even gotten close. During the last decade, real annual growth in GDP peaked in 2006 at 2.7 percent, but has never reached the same level. In fact, the growth rate during the Obama “recovery” averaged just over 2.0 percent, well below the average growth rate for post-WWII economic recoveries of 3.9 percent.
As White House budget director Mick Mulvaney explains in the Wall Street Journal, although the difference of a few percentage points may not seem like much, the real-world impacts are enormous:
The difference between those two growth rates is staggering. If the American economy had grown at only 2% between the end of World War II and 2000, average household income would have been roughly $26,000 instead of $50,000.
Over the next 10 years, 3% growth instead of 2% will yield a nominal gross domestic product that is $16 trillion larger, federal government revenues $2.9 trillion greater, and wages and salaries of American workers $7 trillion higher.
Of course, getting there won’t be easy. In this administration’s eyes it will require laser-like focus on seven key principles, which Mulvaney explains in the Journal:
- Tax reform: Reforming the tax code and reducing tax rates allow for increased business investment, which boosts productivity and increases worker incomes.
- Curbing necessary regulation: Rolling back unnecessary regulations reduces compliance costs, which increases the amount of money businesses have to invest in workers and capital.
- Welfare reform: By realigning the safety net to catch those who truly need it, while providing a helping hand to others who can re-enter the workforce, the administration can reinvigorate the labor pool.
- Smart energy strategy: An “all of the above” energy strategy that unlocks our natural resources allows us to be less dependent on questionable regimes, thereby creating the kind of stability needed for growth.
- Rebuilding America’s infrastructure: Rebuilding roads, bridges, airports and investing in the energy grid will boost the long-term potential of industry.
- Fair trade for America: Expanding trade with the world is an incredible growth opportunity for American businesses, made even more so by ensuring other nation’s play fair and compete on a level playing field.
- Government spending restraint: Federal debt and deficits increase interest rates, which diverts money that would have otherwise gone to private investment. By reducing the deficit and focusing on core government functions investment dollars can be focused on efficient, growth-oriented business sectors.
Unsurprisingly, there are doubters. But tellingly, they aren’t attacking the underlying ideas. Their analysis begins and ends with the feeling that the 3 percent growth target is unrealistic and that it’s being used to artificially balance the budget.
Perhaps they’ve already forgotten that President Obama’s budget projected economic growth of 3.2 percent in 2010 and then 4 percent for the following three years. Or the 5 percent growth prediction that Sen. Bernie Sanders said he would achieve once his political revolution took hold.
Or, as is more likely, perhaps they just can’t think beyond the “new normal” that has resulted from the policies of the last eight years. They think in terms of regulation, not innovation. Of tax revenue instead of business investment. And of fixing inequality rather than growing prosperity. And through those government-centric lenses, 3 percent growth does seem impossible. Fortunately, Republicans are not constrained with such limited thinking.
“[The president’s broad agenda] will remind people—including those who have forgotten or those who don’t want you to remember—what a great America means,” concludes Mulvaney. “That is driving everything we do.”