Just nine months after President Donald Trump's $1.5 trillion of tax cuts, which were supposed to fuel a big jump in the long-term trajectory of U.S. economic growth, things are already slowing down.
That's the consensus of professional economists, based on a survey by the data provider FactSet.
U.S. gross domestic products probably grew at a 3.3% pace in the third quarter, based on the survey. Such a pace would represent a slowdown from the second quarter's 4.2% clip. The Commerce Department's Bureau of Economic Analysis is scheduled to report its initial estimate for third-quarter GDP growth on Friday, Oct. 25.
The report will offer clues on the economy's most recent performance -- a key question for investors as U.S. stock markets swoon on concern that rising interest rates, a scarcity of available workers, creeping inflation and the threat of a prolonged trade war with China might hurt household finances and slow expansion by businesses.
The GDP release also could have political ramifications, since it will be the last official reading prior to next month's U.S. Congressional elections. The second-quarter growth clip was the fastest in four years, prompting Trump to take credit during remarks at the time at the White House.
"These numbers are very, very sustainable," Trump said on July 28. "This isn't a one-time shot." He predicted that growth would reach the highest average annual rate in 13 years -- meaning it would exceed 2005's reported clip of 3.5%.
Recently, Trump has complained that interest-rate increases by the Federal Reserve are crimping what otherwise would ostensibly be faster economic growth and surging stock markets. He's also floated the idea of a second round of tax cuts.
The Standard & Poor's 500 Index of large U.S. stocks has tumbled 7.1% in the past month, nearly wiping out gains for the entire year.
Professional economic forecasters on average expect the economy to grow 2.9% for the full 2018, based on the FactSet survey. That's up from last year's pace of 2.2%, but simply matches the 2.9% clip notched in 2015, the third year of former President Barack Obama's second term. After that, the economy is expected to slow even further, to 2.4% in 2019 and 2% in 2020, the FactSet survey shows.
GDP growth of 3.3% in the third quarter would still be considered strong by most economists; it just doesn't support the Trump administration's predictions of 4%-plus long-term growth made last year when the president and Treasury Secretary Steven Mnuchin were campaigning for the tax cuts.
Another key point is the high cost of the tax-cut plan: The lost revenue to the Treasury swelled the U.S. government's budget deficit to $779 billion, compared with $487 billion estimated prior to the new tax law's enactment last December, according to the Committee for a Responsible Federal Budget, a bipartisan non-profit organization.
Because of the higher deficits, the national debt has rapidly ballooned past $21.5 trillion.
Mnuchin has said that the tax cuts would put the economy on a fast-enough growth trajectory that households and businesses would realize substantially higher income, in turn generating sufficient additional tax revenue to compensate for the tax cuts.
But based on the current pace of economic growth, the additional revenue isn't even close to enough to offset the lost tax collections, according to the Committee for a Responsible Federal Budget.
It's all relative, of course. By most accounts, the economy is running hot, with the U.S. unemployment currently at 3.7%, the lowest since 1969 -- the first year of Richard Nixon's presidency.
Larry Kudlow, director of Trump's National Economic Council, told CNBC on Oct. 12 that "we're in a hot economic boom" and "there's no end in sight." As a result, he argued, "the stock market will get back on track."
Beth Ann Bovino, chief U.S. economist at Standard & Poor's, noted the strength earlier this week in a report.
"The U.S. economy, and particularly the labor market, keep rolling along," she wrote.
The question is whether the economy's hot enough -- for Trump. Or for taxpayers who will eventually have to repay the national debt.
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