A US economic reboot is underway
It’s been awhile since U.S. economic growth has been a show stopper but that may be changing. GDP for the second quarter grew 3.1%, the hottest rate in two years, according to the Bureau of Economic Analysis. And successful tax reform may keep the momentum going.
“We think there will be $2 trillion of growth, so we think this tax plan will cut down the deficit by $1 trillion — that’s a large number. We’re focused on growth. We think the 3% GDP is a very moderate aspiration and we can do higher than that,†Treasury Secretary Steven Mnuchin told FOX Business’ Maria Bartiromo on “Mornings with Maria.â€
This week, Mnuchin and other members of team Trump have been spreading the benefits of tax reform including lowering the corporate tax rate to 20% from 35%. CEOs have indicated they would ramp up hiring and capital spending should tax reform get passed, according to the latest Business Roundtable CEO Economic Outlook Index. If it doesn't the group's members say they will dial back those plans.
Even before the better-than-expected GDP number, investors have been betting that the U.S. economy is headed for better days. Long viewed as a forward-looking barometer, U.S. stocks have been on a steady ascent with the S&P 500, Dow Transports and Russell 2000 companies – a snapshot of mainly domestic businesses – all hitting fresh records. The third quarter, which ends Saturday, marks the eighth straight quarter the Dow Jones Industrial Average has risen. That’s the longest streak in 20 years. Rising financial markets lift investment accounts and 401(k) plans, both avenues of wealth creation.
On Friday, President Trump will take his tax reform message to the National Association of Manufacturers, where he is expected to tout his “Made in America†push. Manufacturers have created 155,000 jobs since the industry’s low in November 2016. Overall, more than 1.3 million jobs have been created since Trump took office.
While many economic watchers consider the second-quarter GDP report a positive, not everyone is in full support of the tax reform blueprint. The National Association of Realtors is opposing the plan, in part due to line-items that include eliminating state and local deductions, for fear it will de-incentivize prospective homebuyers. George Ratiu, managing director of housing and commercial research at the National Association of Realtors, tells FOX Business the U.S. economy will also face some setbacks, citing hurricanes Harvey and Irma. “Third-quarter GDP will be much lower,†he said and asserted that he sees just 1.4% annual growth for the U.S. this year.
“Growth is a 2018 story,†he added.
Suzanne O’Halloran is Managing Editor of FOXBusiness.com and a graduate of Boston College. Follow her on @suzohalloran