The good numbers the U.S. economy showed in the second quarter puts the U.S. “well on the path” for four or five years of sustained annual growth of 3 percent, Treasury Secretary Steve Mnuchin claimed, though mainstream economists disagree.
“We can only project a couple years in the future, but I think we’re well on this path for several years,” Mnuchin said on “Fox News Sunday,” as President Donald Trump’s economic team took to the Sunday shows to tout one quarter of economic figures, Bloomberg reports.
The U.S. economy grew at its fastest quarterly pace since 2014, the government reported on Friday.
Mnuchin said that Trump respects the independence of the Federal Reserve, a suspect claim considering that the president hasn’t been shy at all in giving the Federal Reserve a piece of his mind. He’s used Twitter a number of times to disagree with the Federal Reserve.
Mnuchin even said it was responsible for the Federal Reserve to raise rates as a response to an economy picking up its pace and possibly overheating and inflating without action from the Fed.
“The Fed has been targeting 2 percent inflation, and obviously with 2 percent inflation we have to have at least slightly higher interest rates to manage through that,” he said.
Mostly factors like consumer spending, business investment and a decline in the trade deficit made it possible for this quarter to grow at such a brisk pace, but there are future caveats. As immediate effects from the tax cuts go away, economists expect the pace to moderate, with forecasts showing growth will come in around 3 percent this year, Bloomberg reports.
The other problem is that there’s little expectation for consumer spending to remain as high as it has and continue expanding at its current pace, even if there is some evidence suggesting tax cuts may have helped consumer spending. It wouldn’t be enough to make a big difference in the long run with all of the other economic and world factors driving consumer confidence and spending, Bloomberg economists Carl Riccadonna and Tim Mahedy said in a note.
“Dollar strength will slow exports, and importers will adjust supply lines widening the trade balance,” they wrote. “Furthermore, residential investment looks to remain weak, due in part to last year’s tax reform, and consumer spending will moderate in the second half as the Fed continues to remove policy accommodation.”
The Trump administration put forth an official goal for where it wants GDP growth to be, at 3 percent, which would easily sit above the 2.3 percent average pace during the current expansion, while The Federal Reserve’s future outlook is 1.8 percent, Bloomberg reports.
By: Marie Alford