Project Syndicate: Even if tax cut spurs more investment, it won’t raise the growth rate

James K. Galbraith

AUSTIN, Texas (Project Syndicate) — The Trump administration’s stated economic-policy objective is to increase growth in the United States from the post-financial-crisis rate of around 2% to at least 3%. In historical terms, achieving such growth is not out of the question. Real (inflation-adjusted) growth exceeded 3% in 2005-2006 and 4% in the period from 1997 to 2000; and in over the past three quarters, gross national product has grown at an annualized rate of nearly 3%.

The question is whether that pace can be sustained.

Rather than creating a climate favorable to private consumption and investment, the law’s vast upward redistribution of income and wealth is bound to depress spending, regardless of whether businesses are allowed to retain a larger share of their cash flows.

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