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The Fiscal and Economic Picture Heading into 2020 in 10 Charts
The economy is humming along, having grown at an average inflation-adjusted annual rate of just over 2% over the last four quarters. But it is projected to have grown more slowly this year than the 2.9% expansion in 2018. Still, a CNN poll conducted in mid-December found that 76% of adults say economic conditions are very or somewhat good, the highest share to say so since February 2001. And 68% say they expect the economy to be healthy a year from now, the highest since the end of 2003. President Trump’s re-election prospects may be riding on it.
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Trump has repeatedly called this “The Greatest Economy in American History!” Can you spot the inflection point since he took office?
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The unemployment rate, at 3.5%, is at a 50-year low. The economy has continued to add jobs, though at a slower rate than in 2018.
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And wage growth has picked up, especially for low-wage workers.
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Even as the economy continues to grow, tax receipts have fallen as a share of gross domestic product, while federal spending has edged higher — and is set to jump in the years ahead.
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Corporate tax revenues have fallen significantly since the 2017 Republican tax law was enacted.
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Meanwhile, business investment has not seen the promised boost since the tax cuts were enacted.
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The federal budget deficit is set to surpass $1 trillion this year.
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And policymakers are adding to it. Legislation enacted by Congress and President Trump in 2019 added $2.2 trillion to the projected debt over the next decade. That's on top of the deficit impact of the 2017 tax cuts.
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Tax and spending policies across the federal, state and local levels boosted growth by 0.5 percentage points in the third quarter of 2019, according to the Hutchins Center on Fiscal and Monetary Policy. Federal spending is projected to lift GDP by about 0.11 percentage points in the current fiscal year.
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Column of the Day: NYT’s Leonhardt Takes a Shot at Deficit Hawks
In a piece examining the “centrist bias” in political journalism and how it has hurt progressive Democratic candidates Elizabeth Warren and Bernie Sanders this year, New York Times columnist David Leonhardt writes that moderate Democrats frequently get asked about “style or tactics” while those further to the left face a different sort of questioning: “The skeptical questions for the more progressive candidates, Sanders and Warren, often challenge the substance of their ideas: Are you too radical? Are you being realistic? And, by golly, how would you pay for it all?
“I recently took a detailed look through the coverage of the wealth tax, favored by both Sanders and Warren, and centrist bias seeps through much of it. The coverage has slanted negative, filled with the worries that centrists have — that the tax wouldn’t work in practice or would slow economic growth.
“Experts who favor a wealth tax, like Gene Sperling, Felicia Wong and Heather Boushey, or whose academic research suggests it would work, like Lily Batchelder and David Kamin, have received less attention than experts who don’t like the idea. …
“Once you start thinking about centrist bias, you recognize a lot of it. It helps explain why the 2016 presidential debates focused more on the budget deficit, a topic of centrist zealotry, than climate change, almost certainly a bigger threat. (Well-funded deficit advocacy plays a role too.)” Read the full column at The New York Times.
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Happy Festivus! Air your grievances by emailing us at yrosenberg@thefiscaltimes.com. All we want this holiday season is for you to urge your friends to sign up for their own copy of this newsletter.
We're off for the rest of the decade, but we'll be back in your inboxes in January.
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News
Views and Analysis
- America Turns From Tea Party to MMT in a Decade – Brain Chappatta, Bloomberg
- The Big Economic Lessons of the Decade – Jared Bernstein, Washington Post
- 2019 Was Supposed to Be the Year Washington Lowered Drug Prices. What Happened? – Lev Facher and Nicholas Florko, STAT
- Blowing a Budgetary Hole in the ACA – James C. Capretta, RealClearPolicy
- The Legal Threat to Obamacare Is Back. Again. – New York Times Editorial Board
- Tax Reform Has Delivered for Workers – Gary D. Cohn and Kevin Hassett, Wall Street Journal (paywall)
- Trump’s Tax Cut Was a Mammoth Fraud – Steve Chapman, Chicago Tribune
- Latinos Say They Didn't Benefit From Trump Tax Cuts — Here's Why – Jennifer Brown, The Hill
- How the Economy Could Make or Break Trump in 2020 – Ben White, Politico
- Democrats’ 2020 Economy Dilemma, Explained – Matthew Yglesias, Vox
- Do 2020 Democrats Have a Message on the Economy? Do They Need One? – Dan Balz, Washington Post
- Pay Workers to Leave Depressed Towns – Michael R. Strain, Bloomberg
- The Best Way to Get Money out of Politics Is to Shrink Government – Las Vegas Review-Journal Editorial
- Will the United States Lose the Universe? – Dennis Overbye, New York Times
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