How is the Trump administration going to meet its growth target?
The Trump administration has announced a very high growth target for the United States (3%) at a time when the expansion period is coming to an end and the unemployment rate has reached the level of the structural unemployment rate. How is it going to meet its growth target? By succeeding in maintaining the rapid pace of employment and productivity growth despite the low unemployment rate. This is the idea behind “overheating policiesâ€: if demand-side policies remain expansionary despite a low unemployment rate, it is possible that the participation rate and productivity gains will rise; This will require the ability to keep demand-side policies stimulatory: the Federal Reserve will have to be convinced to continue to cut interest rates; the House of Representatives will have to agree to an even more expansionary fiscal policy.
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