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The White House Is Out With Its Annual Economic Report


We're going to take the risk now of reporting on the future. You have to do that with care. You never get any firsthand information from there. But economists do make forecasts to which businesses respond, so it's important. And the White House is issuing its annual economic report, which includes an optimistic forecast for economic growth, more optimistic than some other forecasts. Kevin Hassett is chairman of the president's Council of Economic Advisers, and he's on the phone. Good morning, sir.

KEVIN HASSETT: Yeah, good morning. It's great to be back.

INSKEEP: When you forecast growth of something better than 3 percent annually, instead of maybe 2, what are you seeing that other economists do not?

HASSETT: The same thing we saw last year, Steve (laughter). I mean, so about this time last year, we put out an economic report that had a forecast that we had actually finalized in November, before the tax cuts passed, and we modeled the number of policies that the President Trump team was going to push and found that the baseline growth forecast was about 2.2, which we agreed with the Obama administration on, but that if all of the policies were pursued last year, that we could get growth up to 3.1, and growth last year was 3.1. It was a pretty good hit.

And so actually that means that for the first two years of the Trump administration, our forecast has been either exactly at or below the economic growth experienced in the year, which is the first time that that's ever happened.

INSKEEP: OK, so first I have to say - yeah.

HASSETT: Those first two years - and so you're calling me rosy forecast guy. I'm just saying, look...

INSKEEP: No, I didn't call you rosy. I called you optimistic. You gave a number.

HASSETT: Optimistic. I am an optimistic fellow. And sure, yes.

INSKEEP: But now, I have to say, first, congratulations on getting that number right. But, of course, as things like the Trump administration's tax cut extend, it gets more and more unpredictable over time. The Trump administration, for example, forecast that the tax cut would pay for itself, which seemed false at the time and turned out to be false. Should people take your economic estimate here as realistic and make plans based on it?

HASSETT: Yeah, for sure. And again, think about it - that over the last two years, things have come in pretty close to what we've said. And I think that you were sort of jumping the gun a little bit to say that these tax cuts - and really, the whole plan because there's more than just taxes affecting growth - can't lift revenues over time. Usually the models that give you long-run feedback, you know, take five, 10 years for the growth of GDP to rise to the level where the revenues are back where they started. But the fact is...

INSKEEP: We're at trillion-dollar deficits.

HASSETT: Can I just - OK, can I - yeah...

INSKEEP: Are we going to get - go ahead.

HASSETT: Yeah. So think about it this way; the current CBO forecast over the next 10 years is that GDP is going to be about $7 trillion higher cumulatively, I think, in part because of all of the policy changes. And so the deficit is a trillion dollars higher, but I'm asking, is that a trade that you would take? So suppose that you're a pessimist about the deficit. Should you trade a trillion-dollar deficit for $7 trillion more in GDP? Would you trade it for having 5 million people get lifted off of food stamps, you know, for wage growth in the bottom decile, north of 6 percent? You know, I think that the policies are really working to improve Americans' lives.


HASSETT: You're right to focus on the deficit in the long run, but I think that the policies that we've pursued are sound ones.

INSKEEP: This is...

HASSETT: And the results are in the data.

INSKEEP: This is an interesting point of view. You will find Democrats who take this point of view. You will sometimes find Republicans who take this point of view. I think you're telling me not that the deficit is meaningless, but don't worry about it; it doesn't matter as much as some other things.

HASSETT: No, I think you should definitely worry about it (laughter). But I think that, you know, again, when President Trump was elected, we were the highest corporate tax place on earth. You know, when was the last time you saw a new factory being built? Manufacturing jobs declined about 200,000 under President Obama. And President Trump has come in, and we've lifted manufacturing jobs already by about 500,000, and the factories are coming back, and they're coming back, you know, because of simple economics 101 - we're an attractive place to be again because the tax rates are back sort of in the middle of the pack for the world.

INSKEEP: Let's acknowledge the manufacturing growth under President Trump. But when you said manufacturing jobs went down under President Obama, what you mean is, went down a lot at the beginning of the Great Recession and then went back up again strongly in the last years of Obama's time, isn't that true?

HASSETT: Well, up strongly, I'm not sure. But you're correct that if we exclude the Great Recession, then there was an uptrend for President Obama in the last four years that accelerated dramatically starting in 2017.

INSKEEP: I want to ask you about some tragic news that has struck your profession in the last day. We've learned that Alan Krueger, who advised President Obama, has died - in the other party, but someone you knew.

HASSETT: Yeah, of course. And I've known - or knew Alan since graduate school. You know, my heart goes out to his family. It's just a tremendous loss for the profession. He was such a great guy, a brilliant economist, a model for all of us. When I was chosen to be the CEA chair for President Trump, he gave me a call and had all sorts of really useful tips and stayed in touch after I got here. You know, he's the kind of person that didn't seek the limelight, but the limelight sought him because of his immense talent.

INSKEEP: On a professional level, did you agree with more than you disagreed about, about how to do economics, how to do forecasting?

HASSETT: I think that - so neither Alan nor I are professional forecasters. We work in different areas in the field - or he worked. But I find that, looking back, that the times when we disagreed, it tended to be because I was incorrect, and he was correct (laughter). He was just one of the greatest living economists. And, you know, I mean, it was really, at times, humbling to be in a room with him because he just had a way to see through the difficult issues that very few people have, and he did it with such congeniality. You know, he would sort of say, well, Kevin, did you think about it this way? And of course that meant that I had gotten it really, terribly wrong.


HASSETT: And yes, I just - we're all going to miss him terribly.

INSKEEP: Well, Mr. Hassett, thanks for taking the time and taking our questions. I really appreciate it.

HASSETT: Yeah, thanks for having me.

INSKEEP: He is chairman of the White House Council of Economic Advisers, and the White House is putting out its economic forecast.

NPR's Scott Horsley has been listening in with us - NPR's chief economics correspondent. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: You also knew Krueger and dealt with him.

HORSLEY: Yes. He had the job in Obama's administration that Kevin Hassett has now, and actually, there was a poignant moment yesterday, as Mr. Hassett was briefing a bunch of reporters about their forecast. We were sitting in the conference room with the Council of Economic Advisers, and there's photos of all the past chairmen hanging on the wall - Alan Krueger's, along with all of his predecessors - and it was a poignant moment.

INSKEEP: Let's talk about the rest of what we heard from Kevin Hassett there. When you listen to that forecast of a little better than 3-percent growth, what stands out to you?

HORSLEY: One thing to keep in mind is that the administration forecast is assuming some positive things - for example, that an infrastructure bill gets passed, that the president's individual tax cuts are made permanent - all that sort of baked into their forecast. On the positive side, they are also assuming that more people come off the sidelines and enter the workforce, that businesses invest more in capital goods and that boosts productivity.

They are certainly more optimistic than most independent forecasters are right now. And even with those relatively rosy expectations, they are projecting trillion-dollar deficits in each of the next four years. But as Mr. Hassett says, they have nailed their forecasts for the first two years of the Trump administration. We'll see where they go from here.

INSKEEP: Is the concern that economists have not that we're heading directly for recession, but that growth may be slowing down?

HORSLEY: That's right, and we've seen that deceleration already from a sort of peak last spring. It's slowed with each quarter. Right now we're at around 2 percent or maybe even less than 1 percent in the current quarter. So what we're seeing is a deceleration.

INSKEEP: When we last heard from Scott Horsley, he was NPR's White House correspondent - now chief economics correspondent. Scott, thanks so much.

HORSLEY: Enjoying the new beat. Thanks. Transcript provided by NPR, Copyright NPR.