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Can The U.S. Economy Keep Growing?


President Trump has been pledging that his policies will ramp up economic growth. His goal has been to double the growth rate of recent years to about 4 percent sustained annual growth. Now, it happened, and it was announced today, and he's taking credit.


PRESIDENT DONALD TRUMP: I am thrilled to announce that in the second quarter of this year, the United States economy grew at the amazing rate of 4.1 percent.

CORNISH: We're joined now by NPR's Chris Arnold. He's been following all of this. Hey there, Chris.


CORNISH: The president was happy. How big a deal is this for everyone else, for the economy?

ARNOLD: Well, 4 percent growth is a potentially very big deal. And we should start by saying, look; the economy is growing at a very healthy pace. It's growing faster than it has in the past few years. Part of this has to do with the tax cut, that people have a little more money in their wallets. They're spending that. Business investments played a role, too. And, you know, if that 4 percent rate could be sustained - and this 2-something percent growth rate up to 4 percent doesn't sound like much, but, I mean, that would just be huge for the standard of living for most Americans - higher wages - very big deal.

But we should also note that even the president himself who is congratulating himself on all of - on this one good quarterly number seemed to back away a bit from his earlier claims of long periods of 4 percent growth. And most economists still think that that's highly unlikely. We talked to Ian Shepherdson. He's chief economist with Pantheon Macroeconomics.

IAN SHEPHERDSON: Well, 4.1 percent is not sustainable. It's as simple as that - no chance. The idea that we could run at 4 having been trending more like 2 1/4, 2 1/2 is just nonsensical.

CORNISH: Now, Chris, if that's so, what's driving this big 4 percent number, and why does Shepherdson think that it won't continue?

ARNOLD: Well, the reason it won't continue has also to do with what's driving it now. And so, OK, the tax cut - that's giving a boost now. But, you know, the tax cut gives a boost early. People got a big boost, a pay raise, if you will. But that's not - they're not going to get another big tax cut next year and the year after that and the year after that. So the impact of that will fade. And another reason has a lot to do with something else that the president brought up today, the trade deficits and exports. Let's hear what he had to say about that.


TRUMP: Perhaps one of the biggest wins in the report - and it is indeed a big one - is that the trade deficit, very dear to my heart because we've been ripped off by the world, has dropped by more than $50 billion.

ARNOLD: Now, it's true. That's an increase in exports. That sounds good. It boosted the economy. But the president left a lot unsaid there.

CORNISH: So explain what's happening with that.

ARNOLD: OK, so obviously we're in a trade war. And that in this perverse way boosted growth in just this one quarter because China was getting ready for these soybean tariffs that were coming into play. And so ahead of those tariffs, China bought massive amounts of soybeans from the U.S., I mean, so many that it actually changed our overall economic output numbers.

But now that the tariffs are in place, that's going to reverse. There won't be all these soybean purchases. Ian Shepherdson who we just heard from says half of that change in the trade deficit was due to this sort of quirk of soybean buying. And now that the tariffs have kicked in, all this is going to be a drag on growth going forward.

CORNISH: Given all that, what are you hearing from economists about growth going forward?

ARNOLD: One we talked to is John Silvia. He's the chief economist of Wells Fargo. Here's what he had to say.

JOHN SILVIA: Well, I think if we can get the trade issues resolved without a lot of hoopla and problems - but, you know, again, that's a big assumption. But if we can get the trade assumptions straightened out, oh, you get - 2 1/2 to 3 percent growth is probably a pretty good number.

ARNOLD: Pretty good number, not what the president had been promising to deliver. It's worth noting, too, the third quarter GDP, the next round of numbers, comes out just about a week before the midterm elections. So expect some very big news and attention around all of this plus whatever's happening with the trade fight. And that's, again, about three months down the road. There'll be a lot of news about this.

CORNISH: That's NPR's Chris Arnold. Chris, thanks so much for explaining it.

SILVIA: You're welcome. Thanks, Audie. Transcript provided by NPR, Copyright NPR.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.
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