Today, the Council of Economic Advisers released its annual Economic Report of the President. The Report shows that three years into the Trump Administration, the U.S. economy continues to outperform pre-2016 election expectations, delivering inclusive gains to American families. As President Trump wrote in his letter introducing the Report, “These results did not come about by accident. Instead, they were supported by our foundational pillars for economic growth that put Americans first, including tax cuts, deregulation, energy independence, and trade renegotiation.”
Contrary to expectations that the expansion would slow as it matured, economic output and labor market gains have accelerated over the past three years, as shown in the figure below.
Reflecting on these gains, the Report highlights the role of the Administration’s prioritization of pro-market reforms to tax, labor, regulation, energy, and healthcare policy. It also identifies several Trump Administration responses to challenges to continued growth, including ensuring that U.S. markets remain economically fair and competitive, combating the ongoing threat of widespread opioid addiction, and addressing the overregulation of housing markets. The Report concludes by setting forth the Administration’s long-run, policy-inclusive economic projections.
Despite strong headwinds from the slowing global economy and several idiosyncratic adverse shocks, Administration policies have helped to keep the U.S. economy resilient. During 2019, several macroeconomic indicators—including consumer spending, productivity, and labor shares of income—grew at elevated rates. As a result, U.S. output has grown at the fastest rate among the G7 countries’ economies in the past year.
With the unemployment rate falling to a 50-year low in 2019, the labor market also tightened further, disproportionately benefiting those previously left behind during the recovery. In stark contrast to the expansion through 2016, policies that both raised labor demand and incentivized employers to invest more in their workers have resulted in wage gains for historically disadvantaged Americans, as shown in the figure below.
A major driver of recent economic gains is the Administration’s regulatory reform agenda. Once fully in effect, the Administration’s approach to Federal regulation will have raised real incomes by an estimated $3,100 per household per year. Of this total, 20 notable Trump Administration deregulatory actions alone are projected to save American consumers and businesses about $220 billion per year once they go into full effect, which will raise real incomes by about 1.3 percent, as shown in the figure below.
Shale oil and gas production growth illustrates the benefits of embracing energy innovation instead of overregulating America’s abundant human and energy resources. By lowering prices, the shale revolution saves the average family of four an estimated $2,500 annually. Additionally, as shown in the figure below, the shale-driven decline in emissions exceeded the projected savings from the now-rescinded Clean Power plan and allowed the United States to realize a larger decline in carbon dioxide emissions than the European Union.
As with energy policy, the Administration embraces innovation and focuses on consumers for healthcare. Choice and competition are the two guiding Administration principles to foster a healthcare system that delivers high-quality services at affordable prices. This approach stands in stark contrast to government mandates that too often reduce consumer choice in healthcare markets and increase premiums.
Turning to potential obstacles to continued economic gains, the Trump Administration recognizes the vital role that competition plays in economic growth. Based on the best available evidence, there is no need to rewrite the Federal Government’s antitrust rules, as the Federal Government has the tools it needs to ensure U.S. markets remain dynamic. Moving forward, the Administration will focus on changing government policies that create an unfair playing field. As the Administration’s historic regulatory reform has shown, eliminating government-imposed barriers to innovation leads to a revitalized private sector.
The opioid crisis poses a major challenge to continued inclusive growth. Though actions taken by the Administration to lower the supply, reduce new demand, and expand treatment options coincided with a flattening in opioid overdose deaths, there is much more that must be done. The opioid crisis has been responsible for more than 400,000 deaths since 2000, and cost an estimated $665 billion in 2018.
Rising housing unaffordability in some U.S. real estate markets also holds back the economy. A key driver of this problem is overregulation by State and local governments that limits supply and increases costs. By driving up home prices, overregulation adversely affects low-income Americans in particular, who spend the largest share of their income on housing. Among 11 particularly supply-constrained areas, deregulation would increase affordability enough to reduce homelessness by an estimated 31 percent on average, as shown in the figure below.
Addressing these and other challenges will support further economic gains for American families. Overall, assuming full implementation of the Administration’s economic policy agenda, real U.S. economic output is projected to grow 3.1 percent in the four quarters of 2020 and at an average annual pace of 2.9 percent between 2019 and 2030.
The 2020 Economic Report of the President shows the success of the Administration’s economic policy agenda and demonstrates that its foundational policy pillars enable the U.S. economy to overcome structural trends that were previously suppressing growth. As President Trump concludes in his introduction to the Report, “though the American economy is stronger than ever, my Administration’s work is not yet done. With a continued focus on policies that increase economic growth, promote opportunity, and uplift our workers, there is no limit on how great America can be.”