United States GDP Growth Set To Hit 15 Year High
According to the latest projections from the Congressional Budget Office (CBO), the United States Gross Domestic Product (GDP) growth is slated to reach a 15-year high in the 4th quarter of 2018. According to The Budget and Economic Outlook, published by the CBO, the GDP is expected to increase 3.3% higher than the fourth quarter of 2017. The last time growth was that high was in 2003, which surpassed the previous year’s GDP by 4.4%.
According to the CBO director, this growth is the direct result of the revised Republican economic policy. Director Keith Hall claims the loosening of restrictions, regulations, and taxes are what allowed businesses to invest in growing their productivity and paying their employees more, which in turn allows their employees to spend and consume more.
Fortune Magazine stated in 2017 that “the White House appears to be counting on 3% annual GDP growth to fund its tax cuts,” but also suggested that it may not be possible in the near future, which is set to be disproven if the forecasts are correct.
The use of economic growth to offset the lost revenue in taxes has long been a part of right-wing economic theories. With taxes now taking a smaller percent, the overall pool of money it is taking from needs to be proportionally larger in order to continue the baseline amount of government spending. And with businesses more willing to invest in the economy, as Hall is indicating, it will be enough. This is in contrast to left-wing economics, which encourages the government to inject money into the consumer base while hoping the resulting growth will offset government spending.
Even with promises of high growth on the horizon, the CBO report still indicates a large deficit and public debt. At present, the government’s debt to public bond-holders is nearly 80% of its GDP. This consists of regular US citizens who have essentially loaned their own money to the government in exchange for yearly payments that will add up to greater than what they loaned. This is especially common in times of war, when “war bonds” are highly encouraged because warfare tends to be extremely expensive in the short-term. In World War 2, public debt surpassed 110% of the GDP but was rapidly paid off until the public debt was just 31% in 1974.
The CBO’s debt forecast projects the public debt to rise once again to nearly 90% of the GDP. Unlike World War 2, this time it shows no sign of ever going down, at least in the foreseeable future. The CBO acknowledges this as a serious problem with consequences such as higher interest, less flexibility on spending, as well as an increased risk of runaway interest and a resulting economic crisis.
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