WASHINGTON – President Donald Trump’s budget will project that the economy continues to grow at a 3 percent rate or higher over the next five years, despite a more pessimistic consensus from outside forecasters.
The White House will release the president’s budget Monday, along with its assumptions about how the economy will evolve under the administration’s proposed policies. The forecasts will show GDP reaching 3.2 percent this year compared to last year and 3.1 percent in 2020, according to a copy of the projections obtained by CNBC. Growth will then level off at 3 percent through 2024, according to the projections.
Those estimates are markedly higher than independent outside projections.
The nonpartisan Congressional Budget Office forecast growth this year at 2.7 percent, followed by a significant dropoff next year to 1.9 percent as the boost from the new tax law peters out. After that, the CBO predicts growth will hover between 1.6 and 1.8 percent through 2029. The Federal Reserve predicts long-run growth at about 2 percent.
However, the administration will tout that it has met or exceeded its economic forecasts for the president’s first two years in office, according to materials obtained by CNBC. In 2017, the White House budget projected growth would be 2.3 percent in the fourth quarter compared to the previous year. It actually hit 2.5 percent.
Last year, the administration forecast 3.1 percent growth by the end of the year. While government data said 2018 growth was 2.9 percent, economists on Wall Street who measure growth on a fourth-quarter-over-fourth-quarter basis say it was 3.1 percent for 2018.
In addition, outside estimates are typically based on current policies.
Trump’s budget – like those of his predecessors – assumes that the proposals outlined in his budget are enacted. An administration official said that includes a one-time spike of $174 billion in defense spending for fiscal year 2020. The budget will also include deep cuts to all other federal spending: a 5 percent reduction from this year’s sequester caps. The White House is also expected to seek $8.6 billion to build the border wall, an official said.
The White House budget will also likely call for making all individual and corporate tax cuts permanent, in a bid to boost growth in later years. The individual tax cuts are currently slated to expire after 2025, while some corporate provisions will phase out over a number of years.
The White House forecasts show the pace of growth edging down to 2.9 percent in 2025, then leveling off at 2.8 percent through 2029. That is on par with the administration’s projections last year.