The GDP growth of USA is one of the most important factors considered to analyze the economic growth. During the Presidential election, Trump promised that a GDP growth of 4% is achievable and sustainable. Experts, however, disagree stating that a GDP growth of even 3% is not sustainable for a decade or more. According to the economists, a maximum achievable GDP growth is 2.5% if President Donald Trump follows through his plans for economic recovery. The GDP growth was 1.9% in the last quarter of 2016 and the figures agree with the opinions of the experts. The expected growth rate was 2.1%, but the achieved growth rate is much less.
Even though customer spending increased in the fourth quarter of 2016, government and business investment declined, offsetting the difference. The output increased by 3.5%. The overall economic growth for 2016 was 1.6%. In 2015, the economic growth reached 2.6% and 2016 proved to be the worst since 2011. The industry hopes that there would be economic growth as the Trump White House has plans to introduce tax reforms, deregulations, and infrastructure spending.
The economic growth will be capped at 2.5% because only that is sustainable. The labor force is rapidly shrinking in the US compared to the total population. There will be more retirees in the near future than those who seek employment. This means that there will be a decrease in the production in the upcoming years. One method to solve this problem is to allow more immigrants to come and work in the USA. However, the POTUS will not be interested in this policy.
For the economic growth to be very good, there must be slack at the present moment. The growth has slowed down because the country is not in recession anymore. The economy has been stabilized and there is no potential for exorbitant growth. The employment rate has also increased and only a negligible percentage seeks unemployment benefits. Even if you consider indirect unemployment, the percentage is very less. This means that there is no slack in the economy and a big boost is not imminent.
New economic growth is only possible through advancements in production and technology. The president is right for once that deregulation is a key to boosting economic growth. The deregulation doesn’t mean that anyone can open their shop in the USA. It simply means that small and medium-sized enterprises that are innovative will get more opportunities for growth. Often, the growth of small businesses is hindered by the extremely strict laws that were introduced at the time of recession. When the regulations are relaxed, innovative companies can move forward with their advanced ideas and contribute to the economic growth.
The Treasury Secretary, Steve Mnuchin is on board with the President as he hopes that the new policies and reforms will make way the for a normalized economic growth of 3% viable in the upcoming years. Mnuchin is hopeful that the President’s forecast of 4% GDP is within reach if the appropriate steps are taken by the new administration.