December 15, 2016

Tax cuts and other fiscal stimulus could boost US contribution to world economic growth up to the level of India


The world economy grew by 2.7% in the third quarter of 2016 compared with a year earlier, down from 2.8% the previous quarter. Growth remains steady in India and China: together they accounted for 65% of world growth. Other emerging markets struggled: they contributed 16%, down from 21% in the previous quarter, their lowest share since 2008. In particular, falling smartphone exports took a heavy toll on South Korea.

Adding US GDP growth to China and India gets to about 75% of world growth.


US real annual GDP growth did not exceed 3% for any of the last ten years



A new macroeconomic analysis of the Trump plan is made by the University of Pennsylvania's Wharton School in collaboration with the Tax Policy Center.

Donald Trump's tax proposals could spur more economic growth and more jobs ... for awhile. But by 2024, that positive effect turns negative. His plan would slow growth created relative to what's expected under today's policies.

Its model estimates that Trump's plan could add an additional 1.1% in 2018 relative to current law. But by 2024 that positive effect is erased and by 2027 it could lower GDP by 0.78%. By 2037, it could produce 4.6% less GDP than expected.

JP Morgan economist Michael Feroli thinks the Trump fiscal program could boost GDP by 1.5% over two years while doubling the federal budget deficit. But import curbs could cripple US businesses dependent on global supply chains.

The nominal US gross domestic product (GDP) grew at an annual rate of 1.9% since 2002.

Tax cuts and other fiscal stimulus could boost US contribution to world economic growth up to the level of India. India has been contributing about 20% of world economic growth. China has been contributing 45%. Higher US growth would also likely boost the growth in other countries as well.





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