By Lloyd Ellison
Can Donald Trump make America’s Real GDP (inflation adjusted) Grow with an average rate of 3.5% a year over the next decade? In my opinion it can not be done. We have not even had a year that reached 3.5% for the last ten years, let alone had an average of 3.5% growth. In the last 10 years real GDP has stayed fairly consistent, around 2%. The U.S. has not seen averages as high or higher than Trumps projections since the 1980’s and 90’s. The fact is to boost growth by large percentage points countries usually need a big population boost, or a big boost in productivity. The U.S. population is ageing, which means the baby boomer generation is already starting to retire, with the youngest of the baby boomers set to retire within 15 years. According to Ben Casselman of FiveThirtyEight, the U.S. will be in better shape than most industrialized nations, but we will still have 21% of the U.S. population over 65 by the year 2050.
The only ways to combat this would be to let more immigrants in to take the jobs of aging Americans or to have a huge boost in population by having more babies. Neither is likely to happen, because at the moment our immigration policy is already what is keeping the percentage of people over 65 at 21%. Donald Trump has not signaled that he is going to increase immigration into the U.S. at such a high rate that the U.S. could see massive growth. The only policy Donald Trump has taken in regards to immigration is the attempt to place a temporary ban on certain countries in the middle east and to deport illegal immigrants at higher rates. Both of these are arguably bad for the economy because the people who would otherwise be contributing to the economy will not be able to anymore. In regards to having more babies, the average American family has gone from having 3.14 children in 1970 to around 2.53 children today (Statista). The odds that people are suddenly going to be having larger families again are quite low.
So we won’t have a population boost, but we could still have a boost in productivity right? Manufacturing productivity has been averaging between 1-2% for the last 8 years (bls.gov). There is not much reason to believe that productivity will go up unless there is a massive shift in technology that allows people to be productive in the same way that there was from the 1970’s-2000’s. So is there anything Donald Trump can do to reach that 3.5% growth rate. Not in a traditional way, and not the levels he suggests, but he could potentially raise it to around 2.5%. Dale Jorgenson, a Harvard Professor, said to the Wall Street Journal that a major policy change like an overhaul to the tax code could boost GDP to 2.4% (WSJ). So maybe if we get a new tax plan we can ridicule Trump for only being 1% off instead of 1.5%. Anything can happen and we still have ten years to go for Trump to prove me wrong, and then all the time it will take to analyze the data.