The International Monetary Fund (IMF) lowered its growth outlook Tuesday for the United States over the next two years due to stalled progress on President Donald Trump’s agenda.
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The organization cut its growth forecast for the current year from a projected 2.3% to 2.1% and lowered its outlook for 2018 from 2.5% to 2.1%. The IMF, which made the higher forecasts in April, had factored in stimulus from some of the Trump administration’s agenda items including tax reform and budget spending cuts.
The IMF made the forecast cuts due to policy uncertainties and the “still evolving plans” of the administration, removing the fiscal benefits of the proposed policies from its newly released projections. The organization also views the administration’s goal of 3% economic growth over the coming years as unsustainable because the labor market is near full employment.
Recommendations for improving US growth
When it comes to improving the outlook for the U.S. economy, the IMF suggests many of the same policy actions that the Trump administration intends to execute. The agency said in order to achieve higher, sustained economic growth, the United States needs to fundamentally reform the tax code through simplification, lowering the corporate rate and providing relief to low- and middle-income demographics.
Additionally, the IMF suggests infrastructure reform will increase U.S. economic expansion. The organization recommends bumping spending up permanently by at least 0.5% of GDP. If the Trump administration’s $1 trillion infrastructure plan is carried out, the IMF said this would “support long-term growth.”
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Improving trade relations to make them more fair and reciprocal – a well-known goal of the president and his administration – would be “welcome,” the IMF writes, while warning it is important the U.S. doesn’t revert to protectionist policies.
Additionally, the IMF recommends “comprehensive skill-based” immigration reform and deregulation among other things that could strengthen U.S. economic growth.
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Trump agenda: Stalled
While the president has signed many executive orders aimed at streamlining processes and trimming bloated government agencies, major legislative victories are yet to be won. The Republican Party is working on passing a bill to repeal and replace the Affordable Care Act—a version of which passed the U.S. House of Representatives last month. A new version is floating around the Senate and could be up for a vote within the chamber as early as this week.
When it comes to tax reform, the administration laid out its broad principles in April. However, lawmakers are still working on a draft proposal that can be brought to Congress.
White House officials are insistent that health care will pass by this summer and that tax reform will get done before year’s end.