Should-Read: This is not an economist's forecast. This is affinity fraud. Directed against Trump? Against Kudlow's Fox News viewers? Against some group of right-wing investors? In all cases, the hope is that the marks have short memories—or that something else will turn up. Paul Bedard: Larry Kudlow predicts 4%-5% growth, 'investment boom': "Larry Kudlow, picked to be President Trump’s new economic adviser...

...has privately told the White House that the nation’s economy is on the verge of 4 percent to 5 percent growth, or more than double the last decade. In a recent gathering with Trump, he said that many firms held back investing until the tax reform package passed and “some of that is already showing up.” What’s more, he told the president, “We’re on the front end of the biggest investment boom in probably 30 to 40 years.” The president responded, “Well, I couldn’t have said it any better”...

The rule-of-thumb is that each 1% point rise in investment as a share of national product adds 0.1% point to the annual growth rate. To get from a growth rate of 2.5% up to 4.5% would thus require a 20% point jump in the investment share of national product—if you were to get it from investment.

Investment

If you were to get it from employment growth, with Okun's Law, you would need the unemployment rate to fall by 1% point per year—which means the unemployment rate would hit zero by the start of 2022. And there are no signs of a productivity growth recovery: given demography, labor productivity growth would have to consistently hit 3.75% per year in order to get to 4.5% per year real GDP growth. And that is something that the U.S. economy simply does not do:

Productivity Growth

It just does not add up.

Comments