Trump’s Growth Dream And The Harsh Reality

Ever since Trump’s election and he and Treasury Secretary Steven Mnuchin uttered the stupidest words ever, I’ve been explaining in every place I can why 4%-plus growth is NOT sustainable… not past the tax-cut gravy train that hit mostly this year.

Ultimately, it mostly comes down to two predictable demographic factors…

As I’ve ALWAYS said, the most important driver of our economy isn’t the president or the Fed or anything other than people!

It all boils down to what people predictably like to spend their money on as they age!

Those two demographic factors making sustainable 4% growth nothing more than Trump’s wet dream are…

  • Workforce growth is slightly negative and overall flat for the coming decade and growing at 0.2% max for decades ahead, and…
  • Productivity has fallen from 3% in 2000 to 0.5% currently and will fall to zero or slightly negative as Baby Boomers continue to age.

That’s what largely drives GDP growth: demographic growth plus productivity gains.

Growth between 0.0% and 0.5% would be the reality and 1% a year would be a stretch at this point without never-ending free money and tax cuts.

And I don’t expect this year’s higher growth rates to last!

We’ve still averaged closer to 2% real GDP growth since 2009, despite the most massive monetary and fiscal stimulus in history.

Even Obama had some 4% quarters. They didn’t last either.

But here’s the final blow…

The average worker peaked in spending (and likely in income) in 2007, exactly as we forecast from the hard facts we found in the annual Consumer Expenditure Survey from The Bureau of Labor. That was simply a 46-year lag on the birth index adjusted for immigration.

Now I’ve come across good data from PayScale on how much the upper crust – full-time college graduates – earn. These people obviously earn more and peak in their spending much later.

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Follow me on Twitter @harrydentjr

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