Economic forecast 2018: Forgotten prosperity finally returns.
WASHINGTON, December 27, 2017: It has been nearly two decades since the American economy has experienced true prosperity. Prosperity means nearly all of us are thriving and experiencing good fortune, success and finding opportunity. If we define prosperity in terms of numbers, GDP growth would have to exceed 4%. That hasn’t happened since 2000, nearly two decades ago. https://www.thebalance.com/us-gdp-by-year-3305543
In a June 12, 2014, speech, then-Treasury Secretary Jack Lew said that the real US GDP growth rate was projected to be just above 2% for the foreseeable future. That statement came at a time when the economy experienced an average 2% growth rate since 2007. The 2% rate did not provide prosperity. Recognizing that the population grows at almost a 1% rate, the low GDP growth rate meant that Americans standard of living was almost stagnant.
Why is prosperity so important?
When economic growth barely exceeds population growth there will not be prosperity. The result is that there is a lack of opportunity for many workers. College graduates take jobs for which they are overqualified, causing many to question the value of a college education.
Because the college grads take lesser jobs, the lower skilled jobs are not available to workers with less than a college education. Many become discouraged while seeking work and eventually drop out of the labor market. It also means that workers are often forced to stay in jobs that are just not right for them, knowing that there is very little choice.
This poor employment picture leads to a high degree of dissatisfaction and frustration. That negatively impacts the country’s mood which may help explain some of the hostility that we are currently experienced.
The poor economic growth is changing.
Since 2005 economic growth has averaged just above 2%. This year growth will be near 3% and may even exceed 3% based on the strong performance of the current quarter. While official estimates for GDP growth for the fourth quarter of 2017 won’t be available until the end of January, preliminary data suggests that growth this quarter will be about 4% and could be as high as 4.5%.
President Trump was sworn into office in late January. He immediately began to reduce burdensome and counterproductive regulations. He also instilled confidence in all sectors of the economy and he increased Americans wealth. These actions resulted in economic growth increasing.
Starting in 2018, primarily because of the growth-inducing tax cut, economic growth will finally exceed 4%. In the following years, depending on a number of variables, growth could exceed 5% and perhaps as high as 6%. This is what happened after the similar tax cuts in 1964 and 1982.
Some working Americans have never seen true prosperity.
Millennials, and Generation Y workers have never seen the benefits of economic prosperity. Since 2005, many college graduates had difficulty finding suitable employment resulting in underemployment and discouraged workers. Once prosperity returns, things will be different.
During prosperous times, college graduates have multiple opportunities. For the past 10 years or so, most new graduates were lucky to find one good opportunity. Lesser skilled workers had difficulty finding entry-level positions. For those with nobs, annual raises and opportunity for advancement became scarce. This led to discouragement.
American Prosperity means American Jobs
Once prosperity returns, the high rate of growth will mean that business needs more workers. That will lead to new graduates finding more than one opportunity and lesser skilled workers finding opportunity to enter the job market. This will reduce underemployment and lure up to 6 million discouraged workers back into the labor force.
The prior administration did not set economic growth as a major goal. Instead they concentrated on curing perceived social injustices to benefit the bottom 15% of income earners, as their primary goal. The result was that health care for all, increases in food stamp and welfare availability, environmental concerns and protecting the most vulnerable, became the policy focus.
Growth was an afterthought, especially if the administration considers 2% growth a new acceptable normal.
Get ready for rapid growth, a return to prosperity and finally opportunity for nearly all Americans who desire to join the labor force. And don’t worry about the deficit since the tax cut will definitely not add to the deficit.
Good times will be here again.