July 26, 2019: Weekly Forecasting Update

Martin Wolf: Donald Trump’s Boom Will Prove to Be Hot Air: "While the long-term effect on growth seems nugatory, the impact on the finances of the federal government is not. That may well be the main point, for congressional Republicans at least. Tax cuts do not pay for themselves. But they help 'starve the beast', in common Republican parlance. The ratio of federal receipts to GDP fell to 17 per cent in the first quarter of 2019, against 18.8 per cent two years before. The gap between receipts and spending also hit 5.5 per cent of GDP in the first quarter of 2019 at what must be close to the peak of the cycle. This could be justified if these deficits were funding investment. But they are doing no such thing. The fiscal incontinence of the Republicans will also have told Democrats that fiscal responsibility is senseless. That realisation will have big long-term effects...